UAE Technology Sector VAT and CT 2026: SaaS, Software, and Tech Companies
UAE technology VAT and CT guide 2026: SaaS and digital services VAT (place of supply rules), IT services VAT, R&D CT deductions, IP income structuring.
UAE technology VAT — digital services and place of supply
| Supply | VAT treatment | Notes |
|---|---|---|
| SaaS supplied to UAE business (B2B) | 5% VAT | UAE-based customer — standard rate |
| SaaS supplied to UAE consumer (B2C) | 5% VAT | UAE customer — standard rate |
| SaaS supplied to overseas customer | Zero-rated | Place of supply is outside UAE |
| Software development for UAE client | 5% VAT | UAE service — standard rate |
| Software development for overseas client | Zero-rated | Place of supply follows customer location |
| IT support services (UAE client) | 5% VAT | Standard rate |
| App store downloads (to UAE users) | 5% VAT | Digital supply to UAE customer |
| Non-UAE company selling SaaS to UAE users | Must register for UAE VAT | Non-resident digital services registration required |
UAE technology corporate tax
- R&D deductions: All revenue and capital expenditure on research and development in UAE is deductible for CT purposes. Software development costs, developer salaries, cloud computing costs for R&D, and IP acquisition costs are all deductible. UAE has not yet introduced an R&D tax credit (unlike Ireland or UK) — it is deduction-only, reducing the taxable income base.
- IP income and free zones: A tech company in a UAE free zone (e.g., Dubai Internet City, Abu Dhabi Hub71) that earns qualifying IP income (SaaS licences, software royalties) from customers outside UAE may qualify for 0% QFZP treatment on that income. The IP must be developed or managed within the free zone, and the customer must be outside UAE mainland.
- Employee share schemes: UAE CT allows a deduction for the cost of employee share options or restricted stock units (RSUs) when they vest — at the market value at vest date. This is relevant for UAE tech startups that compensate employees with equity. The deduction timing and amount must be calculated carefully.
Non-UAE tech companies selling into UAE
- Digital services VAT registration: If a non-UAE company (e.g., a US SaaS company) provides digital services to UAE customers and its UAE revenue exceeds AED 375,000 per year, it must register for UAE VAT and charge 5% on those sales. No UAE physical presence is required — revenue threshold triggers registration.
- What counts as digital services: Software subscriptions, app downloads, cloud storage, streaming, online advertising, and electronic data services. Excluded: professional services delivered via digital means (e.g., online legal advice) — these are not digital services but advisory services.
- Filing obligations: A non-UAE digital services provider registered for UAE VAT must file quarterly VAT returns and remit 5% VAT on UAE sales to the FTA. Payment can be made via international bank transfer to the FTA. No physical presence in UAE is required.
UAE tech company or SaaS provider with VAT and CT questions?
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See CT servicesFrequently asked questions
Does a UAE SaaS company pay 5% VAT on all its software subscriptions?
Only on subscriptions to UAE customers. If your UAE SaaS company sells software subscriptions to customers outside UAE, the place of supply is outside UAE — the supply is zero-rated (no VAT charged, but you can recover input VAT on development costs). If the customer is in UAE, it is 5%. If your revenue is a mix, you have both zero-rated and standard-rated supplies — all fully taxable, full input recovery.
Can a UAE tech company in a free zone pay 0% corporate tax?
Potentially — if it qualifies as a Qualifying Free Zone Person (QFZP). To qualify: the company must be in a UAE free zone; its income must be from ‘qualifying activities’ (which includes software development, SaaS to overseas customers, and certain IP-related activities); it must have adequate economic substance in the free zone; and it must not derive income from UAE mainland. A tech company earning significant revenue from UAE mainland customers would pay 9% on that income — the 0% rate only applies to qualifying income.
Is a non-UAE app store (Apple, Google) required to collect UAE VAT?
Apple App Store and Google Play charge UAE VAT on app purchases and in-app purchases made by UAE users — they collect and remit the 5% VAT. For UAE app developers selling via these stores: the VAT is collected by the platform. For the UAE developer’s share (after platform commission), the developer may need to account for VAT on their net revenue — this depends on the legal structure of the platform’s payment flow. Seek specific advice on app store tax accounting.
Are UAE tech startup founder salaries deductible for corporate tax?
Yes — salaries paid to founders who are employed by and work in the UAE tech company are deductible CT expenses, provided they are commercially reasonable (market-rate). Excessive salaries designed to eliminate taxable profits — above what an arm’s length employee would earn for the same role — would be adjusted by the FTA. Equity compensation (RSUs/options) is also deductible at vest date. Pure profit distributions (dividends) are not deductible.
Official UAE Government Sources