VAT for Trading Companies in the UAE: Imports, Exports and Designated Zones (2026)

General trading is one of the most common licence types in the UAE, and one of the most exposed to VAT risk. Traders move goods across borders, through free zones and between related companies, often on thin margins where a VAT error can wipe out the profit on a deal. They are also the businesses the FTA's new supplier verification rules were largely written for.

This guide is for general trading companies, importers, exporters, distributors and re-exporters. It covers VAT on local sales, imports, exports and designated zones, how to protect input VAT recovery under the 2026 rules, relief for bad debts and second-hand goods, and how corporate tax treats trading income, including in free zones.

Quick answer: local sales of goods carry 5% VAT. Imports carry 5% import VAT, which registered importers account for in their VAT return rather than paying at the border. Exports are zero-rated if the goods leave the UAE within 90 days and you keep proof. Goods moving within or between designated zones can be outside the scope of VAT if strict conditions are met. Trading with mainland customers from a free zone is usually non-qualifying for the 0% corporate tax rate.

Local sales

Goods sold to customers in the UAE are standard-rated at 5%, whether you sell wholesale or retail. A sale to a free zone company on the mainland side of the border, or to a company in a non-designated free zone, is also a normal local sale at 5%.

Imports: customs duty and import VAT

Goods entering the UAE from outside the GCC usually attract 5% customs duty on their customs value, unless an exemption applies. Import VAT of 5% is then charged on the customs value plus duty.

Example: You import goods with a customs value of AED 200,000. Customs duty at 5% is AED 10,000. Import VAT is 5% of AED 210,000, which is AED 10,500.

If you are VAT-registered and your customs registration is linked to your TRN, you don't pay the AED 10,500 in cash. You declare it in Box 6 of your VAT return and, as long as the goods are for your taxable business, recover it as input tax in the same return. Customs duty itself is a cost and isn't recoverable.

Two things to check every quarter:

• Your Box 6 total matches the import VAT shown on your customs declarations. The FTA can see customs data.

• Imports cleared by a clearing agent under their own code, or where VAT was paid in cash at the border, are recovered through the right box. Cash paid at customs is recoverable as ordinary input tax with the customs documents as evidence.

Exports: getting zero-rating right

Goods exported outside the UAE are zero-rated, but only with the right evidence. The goods must physically leave the UAE within 90 days of the date of supply, and you must keep:

• the customs export declaration (exit certificate), and

• commercial evidence, such as the airway bill or bill of lading, the commercial invoice and proof of payment

Without that evidence, the sale is taxed at 5% and the VAT becomes your cost, because you can't usually go back to an overseas customer for it.

Direct and indirect exports

A direct export is when you arrange the shipment. An indirect export is when the overseas customer collects the goods in the UAE and exports them themselves. Indirect exports can also be zero-rated, but the conditions are stricter: the customer must be outside the UAE, must provide you with evidence that the goods were exported within 90 days, and the goods mustn't be used or altered in the UAE before export, except as needed to prepare them for export. In practice, traders lose zero-rating on indirect exports more often than any other kind, because the evidence never comes back from the customer.

Exports count towards the AED 375,000 VAT registration threshold, even though they are zero-rated. Export-heavy traders also tend to carry VAT credits, which are now subject to a five-year time limit. Credits from 2018 to 2021 must be used or refunded by 31 December 2026. Read how to claim them before they expire.

Designated zones

Some free zones, such as Jebel Ali Free Zone and other zones listed by Cabinet Decision, are designated zones for VAT. These are treated as outside the UAE for certain supplies of goods, which creates useful reliefs and some traps.

The relief depends on the zone having proper security and customs controls, and on the goods being genuinely held for trading rather than used. A designated zone warehouse that releases goods to mainland customers without customs documents can create both a customs and a VAT problem. Our related guide on free zone accounting covers the record-keeping side.

Protecting your input VAT under the 2026 rules

Trading is the sector at the centre of the FTA's fight against missing-trader fraud, where VAT is charged along a chain of sales but never paid by one of the companies in it. From 1 October 2026, two rules shift the burden onto buyers.

Supplier verification (FTA Decision No. 13 of 2026). Before claiming input VAT, you must verify your supplier's identity, place of business and licensed activities, and check that prices are commercially reasonable. Full checks apply once a supplier is paid AED 100,000 in 12 months. Enhanced checks, including written confirmation of the supplier's UAE bank account, apply above AED 375,000. Red flags named by the FTA include suppliers that changed address or key people more than twice in a year, and trading volumes that look out of proportion to the supplier's size. Read our supplier verification guide.

Cash payments (Cabinet Decision No. 149 of 2026). Input VAT can be blocked on supplies above a threshold, still to be set by Ministerial Decision, when payment is made or intended to be made in cash. Traders who settle small suppliers in cash for speed should move them to bank transfer. See our guide to the new cash payment rules.

Where these checks aren't done and the supply chain turns out to be linked to evasion, the FTA can deny the input VAT permanently. For a trader buying AED 10 million of goods a year, that is AED 500,000 at risk.

Bad debts, credit notes and returns

You pay VAT when you invoice, not when your customer pays. If a customer never pays, you can reclaim the output VAT through bad debt relief, if all of these apply:

• you supplied the goods and accounted for the VAT,

• more than six months have passed since the date of supply,

• you have written the debt off in your accounts, and

• you have notified the customer in writing that the debt has been written off.

Returns, price reductions and volume rebates should be dealt with through tax credit notes that reference the original invoice. Year-end rebates paid as a lump sum without credit notes are a common error. Our tax invoice guide covers what each credit note must include.

Second-hand goods: the profit margin scheme

Traders in used goods, such as used cars, second-hand machinery, antiques and collectibles, can opt to use the profit margin scheme. Instead of charging 5% on the full selling price, you account for VAT on your margin: the difference between your purchase price and selling price, with VAT calculated as 5/105 of that margin. The scheme only applies where you bought the goods without being able to recover VAT, for example from an individual. You must keep stock records showing the purchase and sale price of each item, and you can't show VAT separately on the invoice.

Example: A used car dealer buys a car from an individual for AED 40,000 and sells it for AED 46,300. The margin is AED 6,300, and VAT is AED 300 (6,300 × 5/105). Under normal rules, VAT would be AED 2,205 on the full price.

Corporate tax for trading companies

Mainland traders

Trading companies pay 9% on taxable profit above AED 375,000. Small traders with revenue up to AED 3,000,000 may be eligible for Small Business Relief. Watch foreign exchange gains and losses on supplier balances, stock write-downs and inventory valuation methods, which all affect taxable profit.

Free zone traders

Many trading companies are in free zones, but only certain trading activities qualify for the 0% rate under Ministerial Decision No. 229 of 2025:

• Trading of qualifying commodities, meaning commodities with a quoted price on a recognised exchange, including physical trading, related hedging and structured commodity finance. This doesn't apply if distribution, warehousing, logistics or inventory management make up 51% or more of revenue.

• Distribution of goods in or from a designated zone, where the goods enter the UAE through a designated zone and are sold to a reseller, a processor or a public benefit entity.

Selling ordinary goods to mainland end users, or to individuals anywhere, is non-qualifying. If non-qualifying revenue goes over the lower of 5% of revenue or AED 5,000,000, the company loses its 0% rate for that year and the next four. Our guide on free zone versus mainland corporate tax explains the test in more detail.

Related-party sourcing

Groups often buy through a related offshore or free zone entity that adds a margin. Those prices must be at arm's length under the transfer pricing rules, and above the thresholds they must be disclosed with the corporate tax return.

Trading company VAT checklist

• Link your customs code to your TRN and reconcile Box 6 to customs data quarterly

• Keep exit certificates and shipping documents for every export

• Chase evidence on indirect exports within 90 days, or charge 5%

• Document designated zone movements and stock controls

• Verify every supplier paid over AED 100,000 a year and stop paying in cash

• Use bad debt relief for unpaid invoices over six months old

• Issue credit notes for returns and rebates

• Check whether your free zone trading activity really qualifies for 0% corporate tax

Frequently asked questions

Is VAT charged on exports from the UAE?

Exports of goods are zero-rated if they leave the UAE within 90 days and you keep customs and commercial evidence.

Do I pay VAT on imports at customs?

Not if you are VAT-registered and your customs registration is linked to your TRN. You declare import VAT in your return and usually recover it at the same time.

Is a sale within Jebel Ali Free Zone subject to VAT?

A sale of goods between companies inside a designated zone can be outside the scope of VAT if the goods aren't consumed in the zone and the conditions are met. Services in the zone are taxed normally.

Can I recover VAT on a customer who never paid?

Yes, through bad debt relief, once more than six months have passed, you have written off the debt and you have told the customer.

Do free zone trading companies pay corporate tax?

Only qualifying trading income is taxed at 0%. Sales to mainland end users or individuals are non-qualifying and can push the company into the 9% rate.

Keeping your trading business compliant

For traders, VAT compliance is now as much about who you buy from as what you sell. A review of your supplier files, customs reconciliation and export evidence protects both your input VAT and your margin. Our VAT and corporate tax team works with trading companies on VAT returns, supplier verification and corporate tax filing. Book a free consultation to get started.

More sector guides: VAT for logistics, VAT for gold and jewellery, VAT for e-commerce.

This article is general information based on UAE VAT and corporate tax legislation as of October 2026, including Federal Decree-Law No. 8 of 2017 as amended, its Executive Regulation, FTA Decision No. 13 of 2026, Cabinet Decision No. 149 of 2026 and Ministerial Decision No. 229 of 2025. It is not tax advice. Check your specific position with the Federal Tax Authority or a qualified adviser.