UAE tax glossary: VAT and Corporate Tax terms, explained.

Plain-English definitions of the UAE VAT, Corporate Tax and Excise Tax terms SMEs meet most often. Each entry explains what the term means, how it works, a worked example in AED, common mistakes and the law behind it, with official sources checked on 29 September 2026.

VAT

• Bad debt relief: Bad debt relief lets a UAE VAT registered supplier reclaim output tax already paid on a customer debt written off more than six months after the supply.
• Blocked input tax: Blocked input tax is UAE VAT a registered business cannot recover even on business costs, such as client entertainment and cars open to personal use.
• Capital assets scheme: A UAE VAT rule that makes you revisit input tax on assets costing AED 5 million or more for 5 or 10 years as their business use changes.
• Deemed supply: A deemed supply is a UAE VAT rule that taxes certain free transfers or private use of business goods and services as if they were sold.
• Designated zone: A designated zone is a Cabinet-listed free zone treated as outside the UAE for certain goods under VAT. Services there are still taxed as in the UAE.
• Exempt supply: An exempt supply carries no UAE VAT, but the supplier cannot recover the input tax on costs that relate to it. Residential rent is a common case.
• Import VAT: Import VAT is the 5% UAE VAT due when goods enter the country from abroad, paid at customs or declared under the reverse charge in the VAT return.
• Input tax: Input tax is the VAT a UAE business pays on its purchases and imports. A registered business can usually deduct it in its VAT return.
• Output tax: Output tax is the VAT a registered UAE business charges on its taxable sales and owes to the FTA, less any input tax it can deduct.
• Place of supply: Place of supply rules decide which country's VAT applies to a sale. If the place of supply is the UAE, UAE VAT applies at 5% or 0%.
• Reverse charge mechanism: Under the UAE reverse charge, a VAT registered buyer accounts for the VAT on certain purchases itself instead of paying it to the supplier.
• Simplified tax invoice: A simplified tax invoice is a shorter UAE VAT invoice allowed for sales to unregistered customers, or to registrants where the value is AED 10,000 or less.
• Tax credit note: A tax credit note reduces or cancels VAT on an earlier supply. UAE registrants must issue one within 14 days of the event that reduces it.
• Tax invoice: A tax invoice is the document a UAE VAT registrant must issue for a taxable supply, with set details, normally within 14 days of supply.
• Taxable supply: A taxable supply is any sale of goods or services for consideration in the course of UAE business that is not exempt, whether at 5% or 0%.
• Time of supply: The time of supply is the date UAE VAT becomes due on a sale, usually the earliest of delivery, completion, payment or invoice.
• VAT group: A VAT group lets related UAE companies under common control register as one taxable person, filing one return with no VAT on supplies between members.
• VAT registration threshold: UAE businesses must register for VAT once taxable supplies and imports pass AED 375,000 in 12 months, and may register voluntarily above AED 187,500.
• VAT tax period: The VAT tax period is the span each UAE VAT return covers, normally three calendar months, with the return and payment due by the 28th day after it ends.
• Zero-rated supply: A zero-rated supply is taxable at 0% VAT in the UAE. No VAT is charged, but the supplier can still recover the input tax on related costs.

Corporate Tax

• Arm's length principle: The arm's length principle says related businesses must price their dealings as independent parties would. Here is how UAE Corporate Tax applies it.
• Connected person: A connected person is an owner, director or officer of a UAE business, or their relative. Payments to them are deductible only up to market value.
• Corporate Tax group: Two or more UAE resident companies under 95% common ownership that file one Corporate Tax return as a single Taxable Person.
• De minimis requirements: The limit on non-qualifying revenue a Qualifying Free Zone Person can earn: 5% of total revenue or AED 5,000,000, whichever is lower.
• Exempt income: Income that UAE Corporate Tax leaves out of taxable income under Article 22, such as dividends from UAE companies, with its related costs.
• Interest deduction limitation: The UAE interest deduction limitation caps net interest at 30% of tax EBITDA, with a AED 12 million safe harbour and a 10 year carry forward.
• Participation exemption: The UAE Corporate Tax relief in Article 23 that exempts dividends and share sale gains from qualifying shareholdings of 5% or more.
• Permanent establishment: A fixed place or dependent agent in the UAE that makes a foreign company taxable on its UAE profits under Article 14 of the Corporate Tax Law.
• Qualifying Free Zone Person: A free zone company that meets every condition in Article 18 of the UAE Corporate Tax Law and pays 0% on its Qualifying Income.
• Qualifying Income: Income of a Qualifying Free Zone Person that is taxed at 0% under UAE Corporate Tax, as defined by Cabinet Decision No. 100 of 2023.
• Related party: Related parties under UAE Corporate Tax are people and companies linked by family, 50% ownership or control. Their dealings must be at arm's length.
• Resident person: A resident person for UAE Corporate Tax is a UAE company, a foreign company managed here, or an individual doing business here. Worldwide income counts.
• Small Business Relief: An election for UAE resident businesses with revenue of AED 3,000,000 or less to be treated as having no taxable income, up to 2029.
• Tax loss relief: Tax loss relief lets a UAE business carry a Corporate Tax loss forward and use it against up to 75% of later Taxable Income, subject to conditions.
• Taxable income: Taxable income is the accounting profit of a UAE business after Corporate Tax adjustments. The first AED 375,000 is taxed at 0% and the rest at 9%.
• Taxable person: A taxable person is anyone subject to UAE Corporate Tax: UAE and some foreign companies, and individuals with business turnover over AED 1 million.
• Transfer pricing: Transfer pricing is how UAE Corporate Tax tests prices between related businesses and owners, and the records a company must keep to support them.
• Withholding tax: UAE withholding tax applies to certain UAE-sourced income paid to non-residents, but the rate is currently 0%, so nothing is deducted in practice.

Excise Tax

• Excise goods: Excise goods are the products the UAE Cabinet makes subject to excise tax: tobacco, vape liquids and devices, energy drinks and sweetened drinks.
• Excise tax: UAE excise tax is charged on selected goods such as tobacco, vapes, energy drinks and sweetened drinks, and paid by importers, producers and stockpilers.

Tax procedures

• Tax registration number: A TRN is the unique number the FTA issues to each person registered for tax. It must appear on tax returns, tax invoices and tax credit notes.
• Tax residency certificate: A tax residency certificate is the FTA document proving a company or individual is UAE tax resident, used mainly to claim double tax treaty benefits.
• Voluntary disclosure: A voluntary disclosure is the FTA form used to correct an error in a submitted tax return, tax assessment or refund claim before the FTA finds it.

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