One-client consulting company in the UAE: VAT and Corporate Tax points to check

A common set-up: a consultant forms a UAE company — often in a free zone — and invoices one client for their services. It is a simple business to run, but three questions decide its tax position: where the client is, whether the client is connected to the owner, and how the owner is paid.

VAT: where is the client?

Two practical traps. First, a single consulting contract can cross the threshold on its own, sometimes within months, so the running 12-month total needs checking every month. Second, zero rating can be lost where someone in the UAE — for example the client's local office or staff — is the one actually receiving the services. If the contract is with the overseas head office but the work is for its Dubai team, check the position before invoicing at 0%. See VAT for exporters of services.

Corporate Tax: 9% above AED 375,000, and the free zone question

The company pays Corporate Tax at 0% on taxable income up to AED 375,000 and 9% above it. Setting up in a free zone does not change this for most consultants: consulting is not a qualifying activity, so fees from clients outside the free zone — including overseas clients — are generally non-qualifying income, and above the de minimis limit the 0% rate is lost for the company's income altogether. See the free zone 0% conditions.

If the client is connected to you

Where the single client is a company the owner, or a member of the owner's family, also owns or controls, the two are related parties. Fees between them must be set at an arm's length price — what unrelated businesses would agree — and documented. The same applies where the company pays the owner or the owner's other companies. See transfer pricing.

How the owner takes money out

• Salary to the owner. A salary for work actually done for the company can be a deductible cost, provided it is at a market level and properly recorded.
• Dividends. Profits can be paid out as dividends after Corporate Tax. If you are tax resident in another country, your home country may tax the salary or dividends — check there before choosing.
• Keep company and personal money apart. Fees go into the company's bank account, and personal spending is not paid from it. Mixing the two is a common reason one-client books need repair at year end.

Before the first invoice

• The contract and the invoice are in the company's name, not yours.
• You know where the client — and the people receiving the services — are located.
• You have a monthly check on the VAT threshold.
• Any connection between you and the client is identified.

How we help

For a one-client company the books are light, so our Starter tier — up to 40 transactions a month — usually fits: bookkeeping from AED 399^* a month, VAT returns from AED 499^* a quarter and the Corporate Tax return from AED 999^* a year, or combined in an All-in-One package. See our consultancy and IT accounting page, or tell us where your client is based.