About this case study
The situation
A mainland trading company in Dubai sells office supplies to local businesses. All its sales are standard-rated. It has annual revenue of AED 4.8 million and expects taxable income of AED 1,200,000 for its financial year. The owner wanted to check both taxes before speaking to their accountant.
What they needed
- Confirmation of whether VAT registration was mandatory.
- The net VAT for a quarter from sales and purchase invoices.
- An estimate of corporate tax for the year.
- Whether Small Business Relief could apply.
How TaxOrch handled it
- 1Check registrationTaxable supplies were well above the AED 375,000 mandatory registration threshold, citing the Federal Tax Authority.
- 2Read the invoicesA quarter's sales and purchase invoices were uploaded and read, and invoices without a valid tax registration number were flagged.
- 3Compute VATThe exact calculator applied 5% to standard-rated sales and purchases to give output tax, recoverable input tax and the net amount.
- 4Estimate corporate tax0% was applied to the first AED 375,000 of taxable income and 9% above it. Small Business Relief was ruled out because revenue exceeded AED 3 million.
The result
| Line | Amount (AED) |
|---|---|
| Standard-rated sales | 1,200,000.00 |
| Output VAT at 5% | 60,000.00 |
| Standard-rated purchases | 800,000.00 |
| Recoverable input VAT at 5% | 40,000.00 |
| Net VAT payable for the quarter | 20,000.00 |
| Line | Amount (AED) |
|---|---|
| Taxable income | 1,200,000.00 |
| First 375,000 at 0% | 0.00 |
| Remaining 825,000 at 9% | 74,250.00 |
| Corporate tax payable | 74,250.00 |
What TaxOrch did not do
- It did not register the company or file any return on EmaraTax.
- It did not pay the Federal Tax Authority.
- It did not decide adjustments to accounting profit; it listed the ones to confirm with the accountant.
- It did not give professional tax advice.
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Frequently asked questions
When must a UAE business register for VAT?
- When taxable supplies and imports exceed AED 375,000 in the past 12 months, or are expected to in the next 30 days. Voluntary registration is possible above AED 187,500.
What is the UAE corporate tax rate?
- 0% on taxable income up to AED 375,000 and 9% on taxable income above that, for most resident businesses.
Did TaxOrch file the VAT return?
- No. TaxOrch prepared the figures as a draft marked as not filed. Returns are filed on the Federal Tax Authority's EmaraTax platform.
Sources
Related on TaxOrch
- UAE tax guideVAT, corporate tax and deadlines.
- TaxOrch for small businessesVAT, payroll and bookkeeping.
- All case studiesMore worked examples.