What VAT a Dubai Trading Company Actually Pays: What You Can Trade and the Setup Cost
Topic Summary
5% VAT Applies to Nearly All Sales
Dubai trading companies have charged a standard 5% VAT on most goods and services since January 1, 2018. Only a short list of zero-rated exports and exempt financial or real estate services fall outside this rule.
Free Zone Status Doesn't Erase VAT
Dubai South Business Hub Free Zone is not a VAT-designated zone, so goods stored there are duty-suspended, not VAT-exempt. The moment stock is invoiced to a UAE buyer, 5% VAT applies regardless of the trading license location.
Registration Thresholds Are Rolling and Strict
Mandatory VAT registration kicks in once taxable supplies and imports pass AED 375,000 over any rolling 12-month period, while voluntary registration opens at AED 187,500. Traders must register promptly after crossing the threshold to avoid penalties, even mid-year.
Exports and Imports Still Count Toward Limits
Zero-rated exports and imports bought for resale both count toward the AED 375,000 threshold test, even though no VAT appears on export invoices. This means fast-growing traders can hit mandatory registration sooner than expected.
A Simple Worked VAT Example
On stock worth AED 200,000 sold for AED 300,000, a registered trader owes AED 5,000 in net VAT to the Federal Tax Authority. Output VAT charged on sales is offset by input VAT reclaimed on purchases, leaving only the difference payable.
Corporate Tax Adds Another 9% Layer
Beyond VAT, corporate tax applies at 9% on profits above the same AED 375,000 threshold. Traders bringing goods into the mainland also face roughly 5% customs duty on CIF value once shipments clear.
Free Zone Location Doesn't Skip Registration
Free zone companies, including those at Dubai South Business Hub, must still register for VAT once taxable supplies exceed AED 375,000 in a rolling year. Location has no bearing on whether the registration obligation applies.
In 2026, 5% VAT still applies to nearly every sale a Dubai trading company makes (u.ae, 2024). That's been true since January 1, 2018. VAT for trading company Dubai kicks in the moment your taxable turnover passes AED 375,000, and voluntary registration opens at AED 187,500 (Federal Tax Authority, 2024). Corporate tax adds 9% on profit above the same AED 375,000 line (Ministry of Finance, 2023). Customs duty of roughly 5% on CIF value also applies once goods clear into the mainland. This guide breaks down what VAT for trading company Dubai actually means in practice: the thresholds, a worked example with round numbers, and the real setup cost at Dubai South Business Hub Free Zone.
What Is VAT for Trading Company Dubai and Why It Matters
VAT for trading company Dubai is the 5% value-added tax charged on most goods and services a trading business buys and sells. It applies whether the company is on the mainland or in a free zone, including Dubai South Business Hub, which is not a designated zone for VAT purposes.
The 5% Standard Rate Explained
The standard rate of 5% has covered most goods and services sold in the UAE since 2018. A short list of supplies is zero-rated, mainly qualifying exports outside the UAE. A smaller list is exempt, largely financial services and residential real estate. A trader selling phone accessories to a Dubai retailer charges 5% VAT on the full invoice value, no exceptions.
Why Free Zone Status Doesn't Mean VAT-Free
Dubai South Business Hub Free Zone is not a designated zone for VAT purposes. Goods held there are duty-suspended, not duty-exempt, so VAT still applies once sold into the UAE market. Stock stored at the hub still carries 5% VAT the moment it's invoiced to a UAE buyer. No trading license dubai removes that domestic VAT obligation.
Who Must Charge VAT on Trading Activity
Any VAT-registered trading company charges output VAT on taxable sales.
Input VAT paid on stock is usually recoverable against output VAT.
Registration status decides the obligation, not company location.
A registered general trading company recovers VAT paid on imported stock.
VAT Registration Thresholds and Conditions for Trading Businesses in the UAE
VAT registration trading business UAE rules require mandatory registration once taxable supplies and imports exceed AED 375,000 over 12 months. Voluntary registration opens from AED 187,500. Both thresholds are rolling, so traders must apply before the deadline passes.
Mandatory Registration Threshold
AED 375,000 in taxable supplies and imports over any rolling 12-month period triggers mandatory registration. The Federal Tax Authority also checks projected turnover for the next 30 days. A trader crossing AED 375,000 in month nine must register right away, not wait for year-end. Missing that deadline invites penalties.
Voluntary Registration Threshold
AED 187,500 lets early-stage traders register voluntarily.
Voluntary registration recovers input VAT on startup stock and expenses.
A new company forecasting AED 200,000 in year-one sales often registers early.
What Counts as Taxable Supplies for Traders
Sales of goods and services inside the UAE count toward the threshold, and so do imports bought for resale. Zero-rated exports still count too, even though no VAT is charged on the invoice. A trader exporting at zero-rate still adds that revenue when checking against AED 375,000.
Do free zone companies still need VAT registration?
Yes. Free zone location doesn't change the threshold test. Once taxable supplies pass AED 375,000 in a rolling year, registration is mandatory regardless of where the trading license was issued, including at Dubai South Business Hub.
How 5 Percent VAT Dubai Trading Actually Works: A Worked Example
5 percent VAT Dubai trading works by charging output VAT on sales and reclaiming input VAT on purchases. The difference goes to the Federal Tax Authority. On stock worth AED 200,000 sold for AED 300,000, the trader owes AED 5,000 net VAT.
Step-by-Step Math on a Round-Number Sale
An electronics trading company imports stock worth AED 200,000 and pays AED 10,000 input VAT at 5%. It resells that stock for AED 300,000, charging AED 15,000 output VAT. Net VAT payable to the Federal Tax Authority is AED 5,000, output minus input.
Why Input VAT Recovery Matters for Traders
Recoverable input VAT stops double taxation across the supply chain.
A valid tax invoice is required for every reclaim.
Missing paperwork delays recovery and hurts cash flow.
A trader without a supplier's tax invoice can't reclaim that AED 10,000.
Steps to Register for VAT as a Dubai Trading Company
Registering for VAT for trading company Dubai involves six steps: confirm turnover against the threshold, gather license and financial documents, create an FTA account, submit the application, receive your Tax Registration Number, then file returns on schedule.
Step 1: Confirm Your Turnover Against the Threshold
Calculate rolling 12-month taxable supplies and imports.
Compare against AED 375,000 mandatory or AED
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Frequently Asked Questions
