Differences between Value Added Tax (VAT) and corporate tax in the UAE

Here are some key differences between Value Added Tax (VAT) and Corporate Tax in the UAE:

Definition:

• Value Added Tax (VAT): An indirect tax imposed on the consumption of goods and services. It is collected by businesses on behalf of the government and added to the final sale price.

• Corporate Tax: A direct tax imposed on corporate profits. Companies pay this tax based on their taxable income.
  

Percentage Rate:

• Value Added Tax (VAT): The standard VAT rate in the UAE is 5%.

• Corporate Tax: The standard corporate tax rate in the UAE is 9% on corporate profits exceeding AED 375,000.
  

Scope:

• Value Added Tax (VAT): Applies to all business transactions involving the sale of goods and services, except for certain exempt or zero-rated cases.

• Corporate Tax: Applies to the net profits of companies from all commercial activities, except for companies engaged in the extraction of natural resources and some other exemptions.
  

Reporting and Payment:

• Value Added Tax (VAT): Businesses are required to submit quarterly tax returns and pay the due tax.

• Corporate Tax: Companies are required to submit annual tax returns and pay the due tax based on the fiscal year.
  

Purpose:

• Value Added Tax (VAT): Aims to generate revenue for the government through the consumption of goods and services.

• Corporate Tax: Aims to generate revenue from corporate profits and encourage transparency and tax compliance.
  

Impact on Prices:

• Value Added Tax (VAT): Directly affects the final sale price to consumers, as it is added to the price of the product or service.

• Corporate Tax: Affects the net profits of the company, not the final sale price of goods and services.

These are some of the key differences between VAT and Corporate Tax in the UAE. If you need more information or further clarifications, feel free to ask.