Corporate Tax for F&B Outlets in the UAE

A restaurant or cafe is taxed on sales less the prime costs of food and labour plus rent and overheads, at the standard bands. Food cost percentage is the industry's vital sign and the tax computation's too: purchases less closing stock, adjusted for genuine wastage.

Delivery platforms have reshaped the revenue line. Commission of 20-30% to aggregators is a deductible operating cost, not a revenue reduction; gross delivery sales are revenue. Cloud kitchens follow the same logic with rent replaced by licence fees.

Dine-in revenue is recognised at the point of sale; delivery revenue when the order is fulfilled. Advance bookings and deposits for events are liabilities until the event. Tips distributed to staff are payroll; service charges retained by the house are revenue.

Retailers compute taxable income as sales less cost of goods sold and operating costs, adjusted under Article 20 of Federal Decree-Law No. 47 of 2022. Returns and refunds reduce revenue in the period they occur, gift vouchers sit as liabilities until redeemed, and loyalty points create deferred revenue where they have real value.

Stock is the heart of the computation: opening stock plus purchases less closing stock gives cost of goods sold, and every dirham of error in the closing count moves profit by the same dirham. Supplier rebates, volume bonuses and prompt-payment discounts reduce purchase cost. Shrinkage that is genuinely unexplained is not deductible; shrinkage evidenced as theft with a police report, or damage with records, follows the accounts.

Deductions that matter most for F&B outlets:

• Food and beverage purchases, net of supplier rebates, are deductible through cost of sales.
• Delivery platform commissions and payment fees are deductible operating costs.
• Chef and service staff wages, visas and accommodation are deductible.

Wastage is deductible where it is real and recorded: spoilage logs, preparation waste and documented comps follow the accounts into cost of sales. What is not deductible is the gap between theoretical food cost and actual food cost with no explanation, which reads as unrecorded sales or undocumented giveaways.

Complimentary meals need a policy: genuine marketing comps to influencers with deliverables are marketing cost; free meals for the owner's friends are private expenditure. The kitchen's comp log is a tax document whether the chef knows it or not.

Retail's classic errors are cash-shaped: unrecorded cash sales, personal spending through the business, and stock counts that are really guesses. Online sellers add platform errors: reporting net payouts as revenue, which understates the revenue tested against the AED 3 million Small Business Relief threshold, and ignoring returns provisions. Businesses selling from a free zone to mainland customers often assume 0% tax; mainland consumer sales are taxed at 9%.

Retail to consumers is the textbook excluded activity: transactions with natural persons cannot be qualifying income for a Qualifying Free Zone Person (Ministerial Decision No. 229 of 2025). A free zone e-commerce company selling to UAE consumers, whether mainland or free zone residents, pays 9% on those profits. The 0% rate is reserved for genuinely different flows: wholesale distribution from a designated zone to foreign or free zone business customers, which is a qualifying activity.

The practical consequence is that most consumer retailers should simply operate as ordinary taxable persons at 9%, with the free zone relevant for logistics and customs rather than the tax rate. Segment any B2B free zone or export revenue separately, because that slice may genuinely qualify for 0%.

F&B sales to consumers are excluded activities for Qualifying Free Zone Person purposes (Ministerial Decision No. 229 of 2025). Free zone restaurants and cloud kitchens pay 9% on profits above the band.

A cafe has AED 2.2 million of dine-in and delivery sales. Food cost is AED 660,000, staff AED 550,000, rent AED 360,000, delivery commissions AED 180,000 and other costs AED 200,000:

The outlet sits inside the 0% band, and with revenue under AED 3 million Small Business Relief is available too. A second outlet doubling the numbers would push taxable income to AED 500,000 and tax to AED 11,250.

For help applying these rules to your own business, including registration, computations and filing, contact us for a quote.