Corporate tax in the UAE marks a major step toward aligning the country’s economy with international standards of transparency and fairness. Introduced under Federal Decree-Law No. (47) of 2022 on the Taxation of Corporations and Businesses, this law came into effect for financial years starting on or after June 1, 2023.
The UAE’s corporate tax regime is designed to support sustainable economic growth while maintaining its business-friendly environment. By keeping the tax rate low and providing exemptions for qualifying entities, the system ensures that businesses can continue to thrive while contributing fairly to the nation’s development. Businesses are usually required to obtain a Tax Identification Number (TIN) during the process.
What Is Corporate Tax?
Corporate tax is a type of direct tax levied on the net income or profits of companies and other business entities. It is sometimes also known as corporate income tax or business profits tax.
In simple terms, after a company deducts its expenses and operational costs from its total revenue, the remaining profit becomes taxable. The UAE’s corporate tax system follows international best practices and applies only to the taxable income of businesses that exceed the defined threshold. Certain payments may also involve withholding tax in the UAE, depending on cross-border transactions.
Background and Legal Framework
The Federal Decree-Law No. (47) of 2022 provides the foundation for corporate taxation in the UAE. Later, it was amended by Federal Decree-Law No. (60) of 2023, which refined certain provisions.
The Ministry of Finance (MoF) and the Federal Tax Authority (FTA) are the only official bodies authorized to issue guidance and clarifications about the Corporate Tax Law. Businesses are advised to rely exclusively on these authorities for authentic information and updates. Some companies might also need a UAE Tax Residency Certificate for treaty benefits.
Corporate tax in the UAE aims to:
- Strengthen the country’s fiscal stability.
- Support economic diversification beyond oil revenues.
- Reinforce the UAE’s global reputation as a transparent and reliable business hub.
Who Is Subject to Corporate Tax in the UAE?
Corporate tax applies to entities classified as “Taxable Persons.” These include both UAE-based and foreign businesses operating within the country’s jurisdiction.
1. Resident Persons
The following entities are considered resident taxable persons:
- UAE companies and other juridical persons incorporated in the UAE.
- Foreign companies effectively managed and controlled in the UAE.
- Individuals (natural persons) engaged in a business or business activity within the UAE as specified by Cabinet Decision.
2. Non-Resident Persons
Non-residents are subject to corporate tax if they:
- Have a permanent establishment in the UAE.
- Earn UAE-sourced income not related to a permanent establishment.
- Have a nexus in the UAE (further details to be issued by Cabinet Decision).
3. Free Zone Persons
Businesses established in UAE Free Zones are also within the scope of corporate tax but may enjoy special tax benefits.
A Qualifying Free Zone Person (QFZP) that meets specific conditions may be taxed at 0% on its qualifying income while being subject to 9% on non-qualifying income. It’s also important to compare the rules with capital gains tax to understand how profits are treated.
Who Is Exempt from Corporate Tax?
Certain entities are exempt from corporate tax due to their role in public welfare or economic development. These include:
Automatically Exempt Entities
- UAE Government entities.
- Government-controlled entities listed in a Cabinet Decision.
Conditionally Exempt Entities
Entities that must notify or apply to the MoF or FTA include:
- Extractive businesses (e.g., oil and gas operations).
- Non-extractive natural resource businesses.
- Qualifying public benefit entities.
- Pension and social security funds.
- Qualifying investment funds.
- Wholly owned subsidiaries of the above exempt entities.
Exempt entities are often not required to register or file for corporate tax unless they engage in other taxable activities. Discover more tax guides on Arabian Vox.
Corporate Tax Rates in the UAE
The UAE corporate tax regime offers a competitive rate structure that maintains its global business attractiveness:
|
Taxable Income |
Corporate Tax Rate |
|
0 to AED 375,000 |
0% (to support small businesses) |
|
Above AED 375,000 |
9% standard rate |
|
Qualifying Free Zone income |
0% |
|
Multinational enterprises subject to OECD BEPS Pillar 2 |
15% (Global Minimum Tax) |
This progressive structure ensures fairness while supporting entrepreneurship and small business growth.
Taxable Income and Calculation
Corporate tax is imposed on the taxable income earned during a tax period (usually one financial year). Businesses must calculate their net profit or loss before tax as per their financial statements, then adjust it for exempt income and non-deductible expenses.
Example of Tax Calculation
If a company reports a net profit of AED 1,000,000:
- The first AED 375,000 → 0% tax
- Remaining AED 625,000 → 9% tax = AED 56,250
So, the total corporate tax payable = AED 56,250.
Registering, Filing, and Paying Corporate Tax
All Taxable Persons! Including companies, individuals conducting business, and Free Zone entities, must register with the Federal Tax Authority (FTA) for corporate tax purposes.
1. Registration
- Taxable Persons must obtain a Corporate Tax Registration Number (CTRN) from the FTA.
- Some Exempt Persons may also be requested to register if required by the FTA.
- Registration is typically done online through the FTA portal.
For the in-depth guide, visit here: Registering for corporate tax
2. Filing Corporate Tax Returns
- Businesses must file a Corporate Tax Return for each Tax Period within 9 months after the end of that period.
- The tax return must include all relevant income, expenses, and adjustments.
- Only one return per financial year is generally required.
3. Payment of Corporate Tax
- Any corporate tax due must be paid within 9 months from the end of the tax period.
- Payments can be made electronically through the FTA’s e-Services platform.
Example of Deadlines
|
Financial Year End |
Filing Deadline |
Payment Deadline |
|
31 May 2024 |
28 February 2025 |
28 February 2025 |
|
31 December 2024 |
30 September 2025 |
30 September 2025 |
Failure to file or pay on time can lead to penalties under the UAE tax regulations.
How to Prepare for Corporate Tax in the UAE
Proper preparation helps businesses stay compliant and avoid penalties. Here’s a practical roadmap for UAE companies:
Step 1: Understand the Law
Study the Corporate Tax Law and guidance issued by the Ministry of Finance (MoF) and the Federal Tax Authority (FTA) to understand how the law applies to your business.
Step 2: Determine Applicability
Assess whether your company falls under the definition of a Taxable Person, Exempt Person, or Qualifying Free Zone Person (QFZP).
Step 3: Organize Financial Records
Ensure all accounting records and financial statements are accurate, transparent, and up to international standards. Businesses are required to maintain records for at least 7 years.
Browse more expert insights in the Finance category.
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Step 4: Register and Comply
- Register with the FTA within the required timeframe.
- Determine your Tax Period and filing deadlines.
- Keep track of deductible expenses and non-taxable income.
Step 5: Seek Professional Assistance
For complex structures or multinational operations, consulting a tax advisor or corporate tax consultant can help ensure full compliance and optimize tax efficiency.
Key Compliance Tips for Businesses
To operate smoothly under the UAE corporate tax system, businesses should:
- Maintain separate books of accounts for different business activities.
- Review Free Zone eligibility annually if claiming 0% tax benefits.
- Follow transfer pricing documentation requirements for related-party transactions.
- Monitor updates from MoF and FTA regularly for new Cabinet or Ministerial Decisions.
- Prepare for audits, the FTA may request documentation to verify reported income.
Staying proactive in compliance not only avoids fines but also enhances corporate transparency and credibility.
Global Minimum Tax (OECD BEPS Pillar 2)
In 2024, the UAE introduced Cabinet Decision No. 142 of 2024, implementing the Top-Up Tax for Multinational Enterprises (MNEs) as part of the OECD’s Pillar 2 framework.
This ensures that multinational groups with consolidated revenues of €750 million or more are taxed at a minimum effective rate of 15%. The UAE currently applies the Domestic Minimum Top-Up Tax (DMTT) to align with global taxation standards.
Benefits of Corporate Tax for the UAE Economy
While taxation may seem like an additional responsibility for businesses, it offers long-term economic benefits, including:
- Increased transparency in financial reporting.
- Enhanced investor confidence in the UAE’s regulatory framework.
- Support for national infrastructure and public development projects.
Fair competition among businesses operating locally and internationally.
FAQs
When did corporate tax start in the UAE?
Corporate tax became effective on June 1, 2023, for financial years beginning on or after that date.
What is the standard corporate tax rate?
The standard rate is 9% on taxable income exceeding AED 375,000.
Do Free Zone companies have to pay corporate tax?
Yes, Free Zone companies are within the scope of corporate tax but may enjoy a 0% rate on qualifying income if they meet specific conditions.
Are individuals subject to corporate tax?
Only individuals engaged in business or professional activities in the UAE are subject to corporate tax; personal income (like salaries) is not taxed.
How can businesses register for corporate tax?
Registration can be completed through the FTA’s online portal, where a Corporate Tax Registration Number (CTRN) is issued.
What happens if a company fails to register or file taxes?
Non-compliance can lead to financial penalties and restrictions under UAE tax regulations.
Who are the official sources of information?
Only the Ministry of Finance (MoF) and the Federal Tax Authority (FTA) are authorized to publish information on UAE corporate tax.
