
Our accounting and taxation specialist Maria Spirina talks in detail about one of the cases of an IT company registered in the UAE.
Al-Fatah Technologies, a company registered in Dubai in the Dubai Silicon Oasis Free Zone (DSO), operates in the IT sector and pays two taxes in the UAE: value added tax (VAT) and corporate tax (relevant for all companies in the UAE that have a trade license, with the exception of some frison companies). The company provides software development services for clients in the UAE and beyond
Using the example of this IT startup, we will analyze the process of paying taxes, deadlines for filing declarations, the amount of taxes and the consequences for late payment. So, let’s figure it out!
Value added tax (VAT)
Registration and bid
Al-Fatah Technology Company is registered for VAT payment in accordance with Federal Decree-Law No. 8 of 2017. The threshold for mandatory registration is 375,000 UAE dirhams (about $102,000) of taxable revenue, and the base VAT rate is 5%.
Filing of declarations and deadlines
The company is required to submit VAT returns every three months. The tax period is determined individually for each taxpayer, is 3 calendar months and is fixed in the VAT Registration Certificate. The declaration must be submitted within the next month after the end of the tax period.
Payment of VAT
After submitting the declaration, the company must pay the accrued VAT before the end of the month following the last month of the end of the tax period, for example, if the company has accrued VAT for the period January-March in the amount of 50,000 dirhams, then it is obliged to submit the declaration and pay the tax by April 30.
Penalties for late payment of VAT
If Al-Fatah Technologies does not pay VAT on time, it will be fined:
- Penalty for late filing of the declaration:1,000 AED for the first time.
- 2,000 AED in case of recurrence within 24 months.
- Penalty for late payment of tax: in the amount of no more than 300%, in accordance with the following:
- 2% of the amount of unpaid tax is payable on the next day after the due date, if the tax is paid within 1 month after the expiration of the allotted period;
- A monthly fine of 4% is charged after one month from the date of payment.
Example:
If the company has not paid 50,000 dirhams by April 30, then on May 1 the amount of the fine will be:
- 1000 AED for late filing of the declaration.
- 2% of the amount (1000 AED) for late payment of tax.
Total: 2000 AED.
Corporate tax
Terms and tax rate

Al-Fatah Technology is subject to corporate tax. The tax rate for the company is 9% of net profit (net profit is defined as income minus expenses and a non-taxable threshold set at 375,000 AED).
Filing of the declaration and deadlines
The company must file a corporate tax return annually. The financial year for the company is defined in the corporate tax registration certificate. The declaration must be submitted no later than 9 months from the date of the end of the financial year.
Payment of corporate tax
If the financial year of Al-Fatah Technology ends on December 31 and the company has made a profit of 1,000,000 dirhams, then the corporate tax will amount to 56,250 dirhams (1.000.000-375.000)/100*9), which must be paid by September 30, having submitted a corporate tax return.
Penalties for non-payment of corporate tax
If a company does not pay corporate tax on time, it may face the following sanctions:
- Penalty for failure to submit a declaration: 500 AED for each month or part of the month during the first twelve months, 1,000 AED for each month or part of the month starting from the thirteenth month.
- Penalty for non-payment of tax: a monthly fine in the amount of 14% per annum, accrued for each month or part of the month from the outstanding amount of tax payable starting from the day following the established payment date and on the same day monthly thereafter.
Example:
If the company has not paid corporate tax in the amount of 56,250 dirhams by September 30, then by October 1, the fines will amount to:
- 500 AED for failure to submit a declaration;
- 656.25 AED for late payment of tax.
Total: 8375 AED.
Total
If the company does not fulfill its tax obligations on time, total fines can amount to tens of thousands of dirhams, depending on the duration of the delay and the amount of arrears.
It is important for a company in the UAE to strictly comply with its tax obligations on both VAT and corporate tax. Timely filing of declarations and payment of taxes will help to avoid significant fines and violations of the law. It is important to remember that the Federal Tax Administration (FTA) The UAE actively monitors compliance with tax laws, and companies should be prepared for possible inspections and consequences for non-fulfillment of their obligations.
If you have any questions about the specifics of calculating and paying taxes or accounting support in the UAE, leave a request to our managers and they will tell you in detail about all the details of services, the cost of support and share useful guides.