Interior design and fit-out companies in the UAE must register for Corporate Tax and file a return every year, even in a loss year. Profit is measured project by project: advances are not revenue until work is done, and retentions still count once earned. Tax is 9% above AED 375,000, and December 2025 year ends must file by 30 September 2026.
- Your company designs, supplies or executes interiors for offices, villas, restaurants or retail units
- You bill clients by milestone and collect advances before work starts
- You subcontract joinery, MEP, gypsum or glass work to other firms
- Clients hold back retentions until handover or the end of the defects period
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Do interior design and fit-out companies have to pay Corporate Tax?
Every interior design or fit-out company registered in the UAE must register for Corporate Tax and file a return, and pays 9% on taxable income above AED 375,000. A studio with few projects or a loss still files; only a sole designer working without a company is outside the regime until business turnover passes AED 1M in a calendar year.
Here is how the main thresholds apply to design studios and fit-out contractors as of September 2026.
| Profile | Corporate Tax | VAT |
|---|---|---|
| Design-only studio (LLC) with 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 pass AED 375,000; voluntary from AED 187,500 |
| Design-and-build fit-out contractor above AED 3M | Full calculation: 0% on first AED 375,000, 9% above | Registered; 5% on design and execution for UAE clients |
| Free zone design company billing mainland clients | Mainland client income is generally non-qualifying for the 0% free zone rate | Services are 5% even inside a designated zone |
| Freelance interior designer, no company | Only once business turnover exceeds AED 1M in a calendar year | Same AED 375,000 threshold |
Fit-out firms that also sell furniture from a showroom should watch the revenue line: combined sales can pass AED 3M and end Small Business Relief even when the design arm is small. The VAT side of that mix is covered in VAT for furniture retailers.
How is project revenue taxed for a fit-out company?
Project revenue is taxed when it is earned in your financial statements, not when the client pays or when you raise an invoice. Taxable income starts from accounting profit, so the way you recognise milestones, advances and work in progress at 31 December decides how much profit lands in 2025.
Milestone billing and work in progress
A fit-out contract normally bills at mobilisation, first fix, second fix and handover. Those invoice dates rarely match the work actually done on 31 December. A project that is 70% complete but has only billed the 40% milestone has unbilled revenue; one that billed 60% with half the work done has billed ahead. Recognising revenue by stage of completion, with costs matched to the same stage, keeps profit honest. Our revenue recognition guide explains the accounting rules.
Client advances and supplier advances
The 30% mobilisation advance a villa owner pays before you order a single board is a liability, not income. It becomes revenue only as work is delivered. The same logic runs the other way: advances you pay to a stone supplier or a joinery workshop are prepayments, not expenses, until the goods or work arrive.
| Item at 31 December | Correct treatment | Effect if booked wrongly |
|---|---|---|
| Client advance for work not yet started | Liability (contract liability) | Booking it as revenue overstates profit and can push revenue over AED 3M |
| Work done but not yet billed | Unbilled revenue (asset) | Leaving it out understates profit and makes the return incorrect |
| Advance paid to supplier for materials | Prepayment (asset) | Expensing it understates profit |
| Materials delivered to site, not yet installed | Inventory or project cost, depending on the contract | Ignoring it misstates cost of sales |
How should subcontractors, design fees and retentions be handled for Corporate Tax?
Subcontractor costs are deductible when the work is done, design fees are revenue when the design stage is delivered, and retentions are revenue once earned even though the cash is held back. Getting the timing of each right is what separates a defensible fit-out return from an incorrect one.
Subcontracted joinery and MEP
Most fit-out firms subcontract joinery, MEP, ceilings and glazing. Accrue each subcontractor’s work at year end from their progress claims even if the invoice arrives in January, and record retentions you hold back from them as a payable. Costs without an invoice or contract are hard to defend, so insist on proper paperwork from every trade. Our accruals and prepayments guide shows the entries.
Design fee versus execution revenue
A concept and detailed design package is often a separate deliverable from the build. If the client signs off drawings in November 2025 but construction runs into 2026, the design fee usually belongs in 2025 while execution revenue follows the site progress. Splitting the two in your contracts and ledger stops profit from being pushed into the wrong year.
Client retentions
Clients commonly hold back part of each payment until handover or the end of the defects liability period. That retention is revenue you have earned, so it sits as a receivable, not as a deferred amount. If a client later refuses to release it and recovery becomes unlikely, the loss can be recognised in the accounts at that point, with the correspondence kept as evidence.
| Contract element | When it is revenue | Record to keep |
|---|---|---|
| Design fee | When the design stage is delivered and accepted | Signed drawing approval or stage sign-off |
| Execution works | As work progresses on site | Progress reports, consultant certificates |
| Variations | When agreed and performed | Signed variation orders |
| Retention | When the related work is done, even though cash comes later | Retention schedule by project and release date |
How does a fit-out company file its Corporate Tax return?
Budget time for the project review, because a handful of open projects at year end drives most of the work.
List every open project at 31 December 2025
For each one record contract value, variations, amount billed, cash received and percentage complete.
Calculate unbilled revenue and billings in advance
Compare revenue earned to date with amounts invoiced, and post the difference as an asset or liability.
Accrue subcontractor and supplier costs
Use progress claims from joinery, MEP and other trades, and record supplier advances as prepayments.
Count site and warehouse materials
Record boards, tiles, fittings and loose furniture still uninstalled at year end.
Update the retention schedule
Confirm retentions receivable from clients and payable to subcontractors, and review any that look unrecoverable.
Choose Small Business Relief or the standard calculation
Check revenue against the AED 3M limit, then prepare taxable income with add-backs and connected-person adjustments.
Submit on EmaraTax and pay
File the Corporate Tax return and pay any balance by 30 September 2026.
What documents should an interior design company gather before filing?
Have these ready per project, and keep them for 7 years after the period.
- Signed client contracts, BOQs and approved variation orders
- Milestone invoices and the payment certificates or client approvals behind them
- Progress reports or site photos showing completion at year end
- Subcontractor agreements, progress claims and invoices
- Supplier advance receipts and delivery notes for materials
- Site and warehouse material counts
- Retention schedules for clients and subcontractors
- Bank statements, trade licence and Corporate Tax registration certificate
Which deadlines should fit-out and design firms diary for 2026?
The one that cannot move is 30 September 2026, the Corporate Tax return and payment date for years ending 31 December 2025.
| Date | Requirement | Relevant for |
|---|---|---|
| 30 September 2026 | File and pay Corporate Tax | Fit-out companies with a 31 December 2025 year end |
| 7 months after the first tax period ends | File the first return to get a late registration penalty waived | Newly registered studios that registered late |
| 28th of the month after each VAT period | VAT 201 return and payment | VAT-registered design and fit-out firms |
| Within the deregistration window after closing | Cancel Corporate Tax registration | Studios winding up their licence |
| 31 March 2027 | Appoint an e-invoicing Accredited Service Provider (go live 1 July 2027) | Businesses with revenue under AED 50M |
What are the Corporate Tax penalties for interior design companies?
Fit-out firms face the same Corporate Tax penalties as every business under Cabinet Decision 75/2023 as amended, and project timing errors feed the incorrect return line.
| Penalty | Amount | Fit-out example |
|---|---|---|
| Late registration | AED 10,000, waived if the first return is filed within 7 months of the first period end | Studio set up in 2023 that only registered in 2025 |
| Late filing | AED 500 a month for the first 12 months, then AED 1,000 a month | Waiting for a client to sign off final accounts |
| Late payment | 14% a year, calculated monthly | Tax unpaid while retentions are still held |
| Incorrect return | From AED 500, plus 1% a month on any tax difference | Advances booked as revenue or unbilled work left out |
| Records not kept | AED 10,000, or AED 20,000 for a repeat within 24 months | No subcontractor contracts or progress evidence |
| Late deregistration | AED 1,000 a month, capped at AED 10,000 | Licence cancelled but Corporate Tax registration left open |
Picture an illustrative Al Quoz fit-out firm owing AED 18,000 that files 5 months late: 5 x AED 500 = AED 2,500 in late filing, plus AED 18,000 x 14% x 5 / 12 = AED 1,050 in late payment. If the company also registered late and missed the 7-month waiver, AED 10,000 more applies, taking the total to AED 13,550 on top of the tax. The Corporate Tax penalties guide has the full detail.
Worried a penalty is already running?
If your open projects, advances and retentions at 31 December 2025 are not yet sorted, we will show you in 15 minutes what the return needs.
6 Corporate Tax mistakes interior design and fit-out owners make
Almost every one of these comes from treating the bank balance as the profit figure.
- Advances booked as revenue. A mobilisation payment recorded as income overstates profit, can breach the AED 3M relief limit, and makes the return incorrect.
- Material stock on site unrecorded. Boards and fittings delivered but not installed disappear from the balance sheet, understating assets and misstating cost of sales.
- Unbilled work ignored. A project 80% built but billed at 50% leaves earned profit out of the year, which the FTA can assess as a tax difference.
- Subcontractors paid in cash without invoices. Undocumented costs are hard to defend and expose the company to the records penalty.
- Retentions treated as future income. Deferring earned retentions to the release year shifts profit and misstates the return.
- Closing a studio without deregistering. Cancelling the licence but not the Corporate Tax registration triggers AED 1,000 a month up to AED 10,000.
How do fit-out companies avoid FTA penalties?
Tie the finance routine to the project cycle and year end stops being a surprise.
- Monthly: update each project’s percentage complete, billed amount and cost to date
- Monthly: post client advances to a liability account, never straight to sales
- Monthly: accrue subcontractor progress claims received after month end
- Quarterly: file VAT 201 by the 28th and reconcile output VAT to milestone invoices
- Quarterly: review retentions due for release and chase overdue ones in writing
- Annually: count materials on every live site and in the store on 31 December
- Annually: decide Small Business Relief versus the standard route before drafting the return
- Annually: ask a qualified accountant to review project cut-off and the return before filing
Fit-out company already late or holding an FTA notice?
File the overdue Corporate Tax return now using your best project figures, then pay, because the AED 500 monthly penalty and the 14% a year charge both keep running until you do.
If you later find you booked advances as revenue or left out unbilled work, correct the filed return through a voluntary disclosure before the FTA raises it. To dispute a penalty such as late registration, submit a reconsideration request within 40 business days of the decision; if it is rejected, you can go to the Tax Disputes Resolution Committee.
The guide to requesting FTA reconsideration covers wording and evidence, and what to do after missing the Corporate Tax deadline lists the first steps. Closing the studio instead? Read Corporate Tax deregistration first.
Got an FTA notice or missed the deadline?
Send us the notice and your project list and we will explain your options, including reconsideration within 40 business days.
Worked example: an illustrative Dubai fit-out studio
An illustrative Dubai interior design and fit-out studio earns AED 2.4M revenue in 2025 on correctly recognised projects, with accounting profit of AED 520,000. It has never had revenue above AED 3M.
| Figure | With Small Business Relief | Without the relief | If AED 700,000 of 2026 advances were booked as 2025 revenue |
|---|---|---|---|
| Revenue | AED 2,400,000 | AED 2,400,000 | AED 3,100,000 (relief no longer available) |
| Profit | AED 520,000 | AED 520,000 | AED 1,220,000 |
| Taxed at 9% | AED 0 | AED 145,000 | AED 845,000 |
| Corporate Tax | AED 0 | AED 13,050 | AED 76,050 |
| Late filing cost at 4 months | AED 2,000 | AED 2,000 plus AED 609 late payment | AED 2,000 plus late payment |
The third column is what happens when a single mobilisation payment is treated as income: the studio loses the relief and pays AED 76,050 on profit it has not yet earned. Correct cut-off is worth far more than it costs. Read the Small Business Relief guide before electing.
Should a fit-out company file Corporate Tax itself or use an accountant?
A design-only studio with a few completed projects can file on its own, but a contractor with open projects, advances and retentions at year end needs someone who understands project cut-off.
| Approach | Cost | Owner time | Risk | Right for |
|---|---|---|---|---|
| Owner files on EmaraTax | No fee | High | High: advances, WIP and retentions misclassified | Design studio with all projects closed by year end |
| Freelance accountant | Typical market range: below a firm, depends on project count | Medium | Medium: project accounting experience varies | Small studio with simple billing |
| Paci | Fixed quote within 24 hours; bookkeeping from AED 599/month | Low | Lower: qualified accountants review each open project | Design-and-build firms with subcontractors and retentions |
Contractors with larger sites face similar issues, set out in Corporate Tax for construction companies. When you want the return handled, our Corporate Tax filing service begins with a free 15-minute review.
What interior design and fit-out owners actually ask us
Questions studio and contractor owners have raised with us, answered for September 2026.
We lost two confirmed clients and enquiries dried up. If the year ends in a loss, do we still file Corporate Tax?
Yes. Every company files a Corporate Tax return within 9 months of its year end, including loss years and years with no revenue. Filing also records the tax loss, which can generally be used against future profits subject to the conditions in the law; our loss carry-forward guide explains them.
I have run a one-person free zone design company for almost 3 years and I am closing it. What tax steps come first?
File any Corporate Tax return still due, then apply to deregister before cancelling the licence, because late deregistration costs AED 1,000 a month up to AED 10,000. Keep the company’s books and project files for 7 years after closure, since the FTA can still ask for them.
Our Corporate Tax certificate shows a different first tax period from our financial year, and our free zone renewal depends on it. How do we fix it?
Raise a correction with the FTA through EmaraTax and keep written proof of the request, because the return deadline is 9 months after the period end on record and a wrong date moves it. If the FTA issues a decision you disagree with, request reconsideration within 40 business days.
We set up in September 2023, only registered for Corporate Tax in 2025 and received the AED 10,000 penalty. Can we appeal?
First check the waiver: the penalty is waived if your first return is filed within 7 months of the end of your first tax period. If that window has passed, submit a reconsideration request within 40 business days of the penalty decision with your reasons and evidence, and escalate to the Tax Disputes Resolution Committee if it is refused.
Beyond 0% up to AED 375,000 and 9% above, what do small business owners usually miss?
That registering and filing are two separate deadlines with separate penalties. Late registration is a flat AED 10,000, waived only if the first return is filed within 7 months of the first period end, while the return is due 9 months after year end. Many owners also miss that client advances are not revenue.
Frequently asked questions
Is there Corporate Tax on interior design companies in Dubai?+
Yes. Interior design companies in Dubai, mainland or free zone, must register with the FTA and file a Corporate Tax return each year. They pay 9% on taxable income above AED 375,000, or can elect Small Business Relief if revenue is up to AED 3M, for tax periods ending on or before 31 December 2029.
When does a fit-out company recognise revenue for Corporate Tax?+
When it is earned in the financial statements, which for most fit-out contracts means as work progresses rather than when a milestone invoice is raised or cash arrives. Taxable income starts from accounting profit, so project cut-off at year end directly changes tax. Our Corporate Tax return filing guide shows where profit feeds the return.
Are client advances taxable for an interior design company?+
Not until the work they pay for is performed. An advance received before work starts is a liability in the accounts and only becomes revenue as the project progresses. Booking advances as income early overstates profit and can wrongly take revenue above the AED 3M Small Business Relief limit.
Can an interior designer working freelance avoid Corporate Tax?+
An individual designer working without a company only comes into Corporate Tax once business turnover exceeds AED 1M in a calendar year, then registers by 31 March of the following year. Even then, 9% applies only to taxable income above AED 375,000. See Corporate Tax for freelancers for the details.
Are subcontractor payments deductible for a fit-out company?+
Payments to joinery, MEP and other subcontractors for work on your projects are business costs that reduce accounting profit, provided they are supported by contracts and invoices and recorded in the period the work was done. Payments to a subcontractor owned by a shareholder or relative must also be at arm’s length and disclosed with the return.
Do fit-out companies need audited accounts for Corporate Tax?+
Only in specific cases. 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. Your free zone may set its own audit rule, so confirm it with the authority.
What does bookkeeping for a fit-out company need to track for tax?+
Job costing per project, billing against progress, advances, retentions and subcontractor accruals. Without these the year-end profit cannot be supported. Our bookkeeping guide for construction companies shows a practical set-up, and the construction VAT guide covers the VAT side.
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- FTA: Waiver of Penalties
- FTA: Small Business Relief Guide CTGSBR1 (PDF)
- Ministry of Finance: Small Business Relief decision
- FTA: Registration for VAT
Checked against these sources on 15 September 2026. This guide is general information for UAE businesses, not advice on your specific facts.