Running a hardware shop or a building material business in the UAE? Heard all sorts of confusing things about corporate tax and free zones? Well, you’re not alone. Many shopkeepers and suppliers feel a bit lost with the new corporate tax rules.
Let’s clear the air in simple terms — no jargon, no complicated legal talk. Just the facts you need to understand how this affects your business, especially if you are working from Dubai, Sharjah, Ajman, or any of the UAE’s free zones.
What Is Corporate Tax in the UAE?
In 2023, the UAE introduced a corporate tax of 9% on businesses earning more than AED 375,000 profit per year. Below that, no tax is payable.
This tax applies to all businesses, whether you are in a free zone or not, unless you qualify for certain special treatments.
Many hardware and building material suppliers thought free zones meant no corporate tax at all. That’s not exactly true anymore.
Are Free Zone Companies Tax-Free?
Good question! The answer is — it depends.
If you are a business operating inside a Qualified Free Zone, and you only trade within the free zone or outside the UAE, you might still enjoy 0% tax.
But if you start selling goods and services to customers inside the UAE mainland, the situation changes. You might have to pay 9% corporate tax on that part of your income.
So, if you are a hardware supplier or building material trader selling to companies or shopkeepers across the UAE (outside your free zone), you need to be very careful.
Myth 1: All Free Zone Companies Automatically Pay 0% Tax
Wrong. You must qualify for the 0% tax by following certain rules. If you sell in the UAE mainland, you could lose your 0% benefit.
Myth 2: Having a Free Zone License Is Enough
Not true. It’s not just about having the licence. It’s about what type of business activities you do, who your customers are, and where your income comes from.
If you are a shopkeeper or supplier who sells to mainland businesses or directly to customers, you must check if your business still qualifies for the 0% tax.
Myth 3: You Can Just Ignore Corporate Tax if You Are Small
Dangerous thinking! Even if your business earns less than AED 375,000 now, you must still register for corporate tax if you have a free zone licence. You may not have to pay tax yet, but registration is often compulsory.
Ignoring this could lead to heavy fines.
How This Affects Hardware and Building Material Businesses
Most hardware and building material suppliers in the UAE have clients all over — contractors, construction companies, even walk-in customers.
Here’s what you must watch for:
- If most of your sales are to UAE mainland customers, you may need to pay corporate tax.
- If you only export goods or sell to other free zone companies, you might still enjoy 0% tax.
- If you mix both, then part of your income could be taxed and part could be tax-free.
Practical Steps You Should Take Now
- Know your customer base clearly
Check if you are mostly selling inside or outside the UAE mainland. - Speak to a tax consultant
It’s best to get professional advice to avoid mistakes. - Register for corporate tax
Even if your profit is under AED 375,000, registration may be necessary. - Keep your paperwork ready
You’ll need clear invoices showing whether your customers are free zone, mainland, or overseas. - Update your contracts
If you have regular mainland customers, your contracts should mention tax details properly.
Will Corporate Tax Kill My Business Profits?
Not at all — if you plan wisely.
The 9% tax only applies to your profit, not your total sales. And if your profit is below AED 375,000, no corporate tax is charged.
For most small and medium hardware suppliers and building material traders, this is quite manageable.
It’s just important to be clear, organised, and proactive.
What Happens If I Ignore All This?
Simple — big fines and trouble with the authorities.
The UAE government is serious about implementing corporate tax. They are using systems to track who is paying and who is not. Avoiding or delaying registration can cost you much more than the tax itself.
Special Tip for Growing Businesses
If your business is small now but you expect big orders soon (for example, a big construction project buying a lot of material from you), it’s wise to set up your tax systems properly today.
As your business grows, so will your obligations.
Conclusion: Take It Easy, but Take It Seriously
If you are a hardware shopkeeper, supplier of building materials, or wholesaler in the UAE, corporate tax is not something to panic about.
But it’s something you cannot ignore.
Understand where your customers are, what sales you are doing, and keep your accounts clean. If you stay organised, corporate tax will just become a normal part of your business — just like VAT did a few years ago.
Take advice, stay legal, and you can continue growing your business with full confidence.
