A UAE manufacturing company must register for Corporate Tax and file a return every year, including free zone factories and loss-making plants. Tax is 9% on taxable income above AED 375,000. Before filing, value raw materials, WIP and finished goods at cost, capitalise machinery rather than expensing it, and record scrap sales. Returns for December 2025 year ends are due 30 September 2026.
- Your company makes, assembles, packs or processes goods in a UAE industrial area or free zone
- You hold raw materials, work in progress and finished goods at year end
- You bought or sold machinery, moulds or production equipment in 2025
- You sell scrap, offcuts or rejects, or hold an industrial licence or ICV certificate
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Does a small factory in the UAE have to file a Corporate Tax return?
Yes. Every manufacturing company in the UAE, whether in Sharjah’s industrial areas, Dubai Industrial City, KEZAD or a free zone such as JAFZA or RAKEZ, must register for Corporate Tax and file a return each year. A factory in a loss or in its set-up year files too.
The table shows how the main thresholds apply to small manufacturers as of September 2026.
| Factory profile | Corporate Tax | VAT |
|---|---|---|
| Mainland workshop or small factory, revenue up to AED 3M | Registers and files; may elect Small Business Relief for periods ending on or before 31 December 2029 | Mandatory once taxable supplies and imports pass AED 375,000 |
| Mainland factory above AED 3M | Full return: 0% on first AED 375,000 of taxable income, 9% above | VAT registered; 5% on local sales |
| Free zone manufacturer selling abroad and to other free zone companies | Can pay 0% on qualifying income as a Qualifying Free Zone Person if every condition is met | Goods-only designated zone rules may apply; services always 5% |
| Free zone manufacturer selling mostly to mainland distributors | Mainland sales are generally non-qualifying; above the lower of AED 5M or 5% of revenue, 9% applies | 5% on supplies into the mainland |
This post is a filing checklist. For the wider picture of manufacturing reliefs and structures, read our existing UAE manufacturing Corporate Tax guide, and for free zone specifics see Corporate Tax and VAT for JAFZA companies or RAKEZ companies.
How do standard costing, WIP, scrap and utilities affect a factory's taxable profit?
They decide the cost of goods sold, and cost of goods sold decides profit. Because taxable income starts from accounting profit, a factory that undervalues closing WIP, leaves scrap income off the books or misallocates electricity bills files the wrong number even if every invoice is correct.
Standard costing and WIP valuation
Many small factories cost products at a standard rate for material, labour and overhead, then post variances when actual costs differ. At year end, closing stock should reflect actual cost: significant variances need to be spread between goods sold and goods still in stock, rather than all written to the profit and loss account. Half-finished batches on the line at 31 December are work in progress and carry the material, labour and production overhead already absorbed.
| Stock category at 31 December | What cost includes | Tax risk if wrong |
|---|---|---|
| Raw materials | Purchase price, import duty, freight in | Unrecorded materials understate stock and profit |
| Work in progress | Materials issued plus labour and production overhead to date | Ignoring WIP charges costs to 2025 that belong to 2026 |
| Finished goods | Full production cost, excluding selling and admin costs | Including admin costs overstates stock and profit |
| Obsolete or damaged stock | Written down to expected recovery | Keeping it at cost overstates profit |
Scrap sales
Metal offcuts, plastic regrind, cardboard and rejected batches sold to scrap dealers are business income, usually paid in cash. They belong in revenue or as a reduction of production cost, depending on your policy, but they must be recorded either way. They are also taxable supplies for VAT at 5%, and failing to issue a tax invoice or credit note costs AED 2,500 per case.
Energy and utilities allocation
Electricity, water and gas bills from DEWA, SEWA, EtihadWE or ADDC often cover both the production hall and the office. The production share is part of manufacturing overhead and is absorbed into WIP and finished goods; the office share is an administrative expense. Use sub-meters or a documented basis such as machine hours or floor area, and apply it consistently each year.
How are machinery purchases, depreciation and ICV figures treated in a factory's return?
Machinery is capitalised as a fixed asset and its cost is deducted over its useful life through depreciation, not written off in the year of purchase. Gains or losses on selling old equipment also flow into profit.
Machinery capex, depreciation and disposals
A new CNC machine, extrusion line or filling machine is recorded in the fixed asset register at cost, including installation and commissioning, and depreciated over its expected life. The depreciation charged in properly prepared accounts generally flows into taxable income. When you sell or scrap an old machine, compare the proceeds with its remaining book value and record the gain or loss. Our guides on fixed assets accounting and depreciation and amortisation explain the entries.
| Transaction | Correct treatment | Effect of getting it wrong |
|---|---|---|
| AED 400,000 machine bought with a 10-year life | Capitalise; depreciate AED 40,000 a year | Expensing it cuts 2025 profit by AED 360,000 too much |
| Spare parts that extend a machine’s life | Add to the asset’s cost | Treating them as repairs understates profit |
| Routine maintenance and consumables | Expense in the year | Capitalising them overstates profit |
| Old press sold for AED 30,000 with book value AED 10,000 | Record AED 20,000 gain | Leaving the sale unrecorded understates profit |
Industrial licence, ICV certificate and financing
Your industrial licence and In-Country Value certificate do not change the Corporate Tax rate, but ICV certification is built on your financial statements, so the revenue, costs and headcount you submit for ICV should reconcile with the accounts behind your return. Differences between the two are an easy question for anyone reviewing your file. Paci can help with the ICV certificate process.
Interest on bank loans used to buy machinery is a business finance cost and is generally deductible, subject to the interest limitation rules that affect larger borrowers. If a machinery purchase pushed the factory into a loss, the tax loss can generally be carried forward against future profits under conditions set by law; see Corporate Tax loss carry-forward.
What are the steps to file a manufacturing company's Corporate Tax return?
Work through these in order; each step feeds the next, and the EmaraTax entry comes last.
Count stock in three categories
At 31 December 2025, count raw materials, WIP on the line and finished goods, and flag obsolete items.
Value stock at actual cost
Apply standard costs, spread significant variances, and absorb production overhead including the factory share of utilities.
Update the fixed asset register
Capitalise 2025 machinery purchases, record disposals, and calculate depreciation for the year.
Record scrap and reject sales
Collect scrap dealer receipts and make sure each sale has a tax invoice and is in the ledger.
Reconcile to ICV and bank
Agree revenue and costs to the ICV submission and to bank statements, and investigate differences.
Prepare taxable income
Adjust accounting profit for non-deductible items and connected-person payments, then elect Small Business Relief or apply the AED 375,000 0% band, or confirm Qualifying Free Zone Person status.
Submit on EmaraTax and pay
File the Corporate Tax return with the transfer pricing disclosure and pay by 30 September 2026.
What documents does a factory need before filing Corporate Tax?
Use this as the pre-filing pack, and keep every item for 7 years.
- Signed stock count sheets for raw materials, WIP and finished goods
- Standard cost cards and a variance report for the year
- Bills of entry and supplier invoices for imported materials
- Fixed asset register with 2025 additions, disposals and depreciation
- Machinery purchase invoices, installation costs and sale documents for disposed assets
- Scrap dealer receipts and the tax invoices issued for them
- Utility bills with the production and office allocation basis
- Loan agreements and interest statements for machinery finance
- Industrial licence, ICV certificate and the financial data submitted for it
- Trade licence, Corporate Tax registration and VAT certificates
What deadlines should small manufacturers track in 2026 and 2027?
For a factory with a calendar financial year, the Corporate Tax return and payment for 2025 are due on 30 September 2026.
| Date | Obligation | Factories affected |
|---|---|---|
| 30 September 2026 | Corporate Tax return and payment | Years ending 31 December 2025 |
| 28th of the month after each VAT period | VAT 201 return and payment | VAT-registered manufacturers |
| Before filing | Audited financial statements | Qualifying Free Zone Persons and companies with revenue above AED 50M |
| 30 October 2026 | Appoint an e-invoicing Accredited Service Provider (go live 1 January 2027) | Manufacturers with revenue of AED 50M or more |
| 31 March 2027 | Appoint an e-invoicing Accredited Service Provider (go live 1 July 2027) | Manufacturers under AED 50M |
What are the penalties for late or wrong Corporate Tax filing by a factory?
Manufacturers face the Corporate Tax penalties in Cabinet Decision 75/2023 as amended, and costing errors most often lead to the incorrect return and records lines.
| What went wrong | Penalty | Factory example |
|---|---|---|
| Registration missed | AED 10,000, waived if the first return is filed within 7 months of the first tax period’s end | Free zone factory that assumed 0% meant no registration |
| Return late | AED 500 a month for the first 12 months, then AED 1,000 a month | Stock count and costing not finished |
| Tax paid late | 14% a year, charged monthly | Cash tied up in raw material orders |
| Return incorrect | From AED 500, plus 1% a month on the tax difference | Machinery expensed, WIP ignored or scrap left out |
| Records missing | AED 10,000, or AED 20,000 for a repeat within 24 months | No count sheets or fixed asset register |
For an illustrative Sharjah plastics factory owing AED 35,000 and filing 10 months late, late filing adds 10 x AED 500 = AED 5,000 and late payment adds AED 35,000 x 14% x 10 / 12 = about AED 4,083. If an FTA review also finds 12 scrap sales with no tax invoice, the VAT side adds 12 x AED 2,500 = AED 30,000. The Corporate Tax penalties guide has the complete schedule.
Worried a penalty is already running?
If your 2025 stock count, WIP valuation or machinery register is unfinished, a 15-minute review shows what the factory's return still needs.
6 filing mistakes small factory owners make
Each of these shows up regularly when we review factory accounts before filing.
- WIP ignored. Charging all production cost to the year and counting only finished goods understates closing stock and profit, making the return incorrect.
- Scrap sales unrecorded. Cash from scrap dealers that never reaches the ledger understates income for Corporate Tax and leaves VAT invoices unissued at AED 2,500 per case.
- Capex expensed. Writing off a new machine in one year instead of depreciating it understates profit and creates a tax difference the FTA can assess with penalties.
- Utilities dumped into admin costs. Leaving production electricity out of stock valuation distorts cost of sales and closing stock.
- ICV figures that do not match the accounts. Different revenue or cost numbers across submissions undermine the credibility of both.
- Free zone factory assuming automatic 0%. Without audited accounts, substance and non-qualifying revenue within the lower of AED 5M or 5% of revenue, the factory pays 9% for that period and the next 4.
How can a small manufacturer avoid Corporate Tax penalties?
A costing and asset routine run through the year makes the September filing a matter of days.
- Monthly: post production variances and review standard costs against actual prices
- Monthly: record every scrap sale with a tax invoice and bank the cash
- Monthly: allocate utilities between production and office on a fixed basis
- Quarterly: file VAT 201 by the 28th, including scrap and export sales
- Quarterly: update the fixed asset register for additions and disposals
- Annually: hold a full stock count of raw materials, WIP and finished goods with signed sheets
- Annually: reconcile ICV data to the financial statements and decide Small Business Relief, the 0% band or Qualifying Free Zone Person status
- Annually: have a qualified accountant review costing, depreciation and the return before submission
Factory behind on Corporate Tax or facing an FTA notice?
File the outstanding Corporate Tax return as soon as the stock and asset figures can be finalised, and pay the tax, because the monthly filing penalty and the 14% a year charge both run until you do.
If a return already filed expensed machinery or left out scrap income, correct it with a voluntary disclosure before the FTA begins an audit. To dispute a penalty, send a reconsideration request within 40 business days of the decision, and if it is refused, escalate to the Tax Disputes Resolution Committee.
The missed Corporate Tax deadline guide sets out the first steps, and how to request FTA reconsideration covers disputes. If costing records are incomplete, catch-up bookkeeping is the place to start.
Got an FTA notice or missed the deadline?
Send us the notice and your latest trial balance and we will explain your options, including reconsideration within 40 business days.
Worked example: an illustrative Sharjah metal fabrication workshop
An illustrative Sharjah metal fabrication workshop company has AED 2.4M revenue in 2025, including AED 60,000 of recorded scrap sales, and accounting profit of AED 520,000 after depreciation. In 2025 it bought a laser cutter for AED 250,000 with a 10-year life. Revenue has never exceeded AED 3M.
| Line | Small Business Relief | Standard calculation | If the laser cutter was fully expensed |
|---|---|---|---|
| Revenue | AED 2,400,000 | AED 2,400,000 | AED 2,400,000 |
| Depreciation or expense for the machine | AED 25,000 | AED 25,000 | AED 250,000 |
| Accounting profit | AED 520,000 | AED 520,000 | AED 295,000 |
| Taxable above AED 375,000 | Not applicable | AED 145,000 | AED 0 |
| Corporate Tax | AED 0 | AED 13,050 | AED 0 declared, AED 13,050 correctly due |
| If filed 4 months late | AED 2,000 | AED 2,000 plus AED 609 late payment | AED 2,000 plus tax difference and incorrect return penalty |
Expensing the machine removes AED 225,000 of profit that belongs to later years and hides the AED 13,050 of tax, which is an incorrect return if the standard route is used. Electing Small Business Relief is the lawful way for this workshop to pay nothing, while the machine is still depreciated properly in the accounts.
Should a small factory file Corporate Tax itself or use an accountant?
A workshop with no stock at year end and no new machinery can file itself; a factory with WIP, standard costing, capex and scrap income usually needs an accountant who understands production costing.
| Option | Cost | Owner time | Risk | Who it suits |
|---|---|---|---|---|
| Owner files on EmaraTax | No fee | High, during production | High: stock valuation and capex errors | Job-shop with no stock or new assets |
| Freelance accountant | Typical market range: lower than a firm, varies with stock complexity | Medium | Medium: costing and WIP often simplified | Small workshop with simple stock |
| Paci | Fixed quote within 24 hours; bookkeeping from AED 599/month | Low | Lower: qualified accountants review costing, assets and ICV reconciliation | Factories with WIP, capex and free zone questions |
For the monthly books behind the return, see bookkeeping for small manufacturers. To have the return prepared, our Corporate Tax filing service for manufacturers starts with a free 15-minute review.
What factory owners actually ask us about Corporate Tax filing
Questions manufacturing business owners have raised with us, answered for September 2026.
Our factory is in a free zone. Does manufacturing income qualify for the 0% rate?
It can, if the company is a Qualifying Free Zone Person and the income counts as qualifying income, which depends on the activity and on who the customers are. You also need adequate substance, audited financial statements, transfer pricing compliance and non-qualifying revenue within the lower of AED 5M or 5% of revenue. Our Qualifying Free Zone Person guide covers the tests.
Our factory is in a free zone. Do we still have to register for Corporate Tax and VAT?
Yes. Every free zone company registers for Corporate Tax, whatever rate it ends up paying. Late registration costs AED 10,000 unless the first return is filed within 7 months of the end of the first tax period. VAT registration is mandatory once taxable supplies and imports pass AED 375,000.
We sell scrap and offcuts from the factory floor. Is that taxed?
Yes. Scrap proceeds are business income and form part of accounting profit, so they are taxed with the rest of your profit above AED 375,000. They are also taxable supplies for VAT at 5%, so issue a tax invoice for each sale: failing to do so costs AED 2,500 per case.
We bought expensive machinery and made a loss this year. Can we carry the loss forward?
A tax loss can generally be carried forward and set against future taxable income, subject to conditions in the Corporate Tax Law, so file the return to record it. Remember the machine itself is normally depreciated over its useful life rather than deducted in one year, which may make the loss smaller than you expect.
We financed new machinery with a bank loan. Is the interest deductible?
Interest on borrowing used for the business is generally deductible, subject to the interest limitation rules that mainly affect larger borrowers. Keep the loan agreement and interest statements with your filing records for 7 years.
How do I choose an accountant for a small factory's Corporate Tax?
Pick someone who can reconcile your stock count, costing and fixed asset register to the accounts, not just complete the EmaraTax form. The return for a 31 December 2025 year end is due 30 September 2026, and late filing costs AED 500 a month for the first 12 months, then AED 1,000 a month. Our checklist for choosing a tax agent lists red flags.
Frequently asked questions
Do manufacturing companies in the UAE pay Corporate Tax?+
Yes. Manufacturing companies pay 9% Corporate Tax on taxable income above AED 375,000, and 0% below it. A small factory with revenue up to AED 3M can elect Small Business Relief for periods ending on or before 31 December 2029, and a free zone manufacturer may reach 0% on qualifying income as a Qualifying Free Zone Person. All of them register and file.
When is the factory Corporate Tax return due in the UAE?+
Nine months after the financial year end. For a factory with a 31 December 2025 year end, the Corporate Tax return and payment are due by 30 September 2026. Filing late costs AED 500 a month for the first 12 months. Our Corporate Tax return filing guide explains the 9-month rule.
Is machinery depreciation deductible for UAE Corporate Tax?+
Depreciation charged on machinery in financial statements prepared under accepted accounting standards generally flows into taxable income, which is how the cost of equipment is deducted over its life. Buying a machine does not give a one-off deduction for its full price in that year. Keep the fixed asset register and purchase invoices for 7 years.
How should an industrial company in Dubai value closing stock for tax?+
Value raw materials, work in progress and finished goods at cost, including production overhead such as the factory share of utilities, and write down obsolete or damaged items. Closing stock reduces cost of sales, so undervaluing it lowers profit and makes the return incorrect. See UAE inventory accounting for methods.
Do small factories need audited accounts for Corporate Tax?+
Under Ministerial Decision No. 84 of 2025, audited financial statements are required for tax periods starting on or after 1 January 2025 where revenue exceeds AED 50,000,000, and for every Qualifying Free Zone Person. A free zone factory claiming 0% therefore needs an audit whatever its size. Free zone authorities may set their own audit rules too.
How much does it cost to have a factory's Corporate Tax return prepared?+
It depends on stock complexity, number of entities and the state of the books rather than on a set price list. Paci gives a fixed quote within 24 hours after a free 15-minute review, and bookkeeping starts from AED 599/month. For typical market ranges see Corporate Tax filing costs in the UAE.
Get your factory's Corporate Tax return reviewed for free
In a free 15-minute review a qualified accountant checks your stock and WIP valuation, machinery capex, scrap income and ICV figures against the return. You receive a fixed quote within 24 hours, never an hourly bill.
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- FTA: Waiver of Penalties
- FTA: Registration for VAT
- FTA: Small Business Relief Guide CTGSBR1 (PDF)
- UAE Legislation: Cabinet Decision 116 of 2022 (AED 375,000 threshold)
Checked against these sources on 15 September 2026. This guide is general information for UAE businesses, not advice on your specific facts.