What Is UAE Corporate Tax? A Beginner’s Guide for Businesses

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Research Team UAE Corporate Tax
Corporate tax

The introduction of corporate tax in the UAE marks a significant shift in the country’s business landscape. While the UAE has long been known for its low-tax environment, the introduction of corporate tax reflects its alignment with international tax standards, economic sustainability, and global transparency. For businesses in the UAE—whether on the mainland, in free zones, or foreign-owned—it’s now important to understand how corporate tax works, who it applies to, and what it means for day-to-day operations. 

What Is UAE Corporate Tax? 

UAE Corporate Tax (CT) is a federal tax on the taxable income of businesses operating in the UAE. It is governed by Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses, which came into effect for financial years starting on or after 1 June 2023. Unlike VAT, which applies to transactions, corporate tax is levied on a company’s annual taxable income after allowable deductions. 

Why the UAE Introduced Corporate Tax 

The UAE implemented corporate tax to: 

  • Align with OECD global tax standards 
  • Support economic sustainability 
  • Boost foreign investment confidence 
  • Maintain compliance with international tax transparency frameworks 

Despite the introduction of corporate tax, the UAE remains a highly competitive jurisdiction with attractive tax rates for businesses. 

Who Is Subject to UAE Corporate Tax? 

Corporate tax applies to: 

  • UAE-Based Businesses: Mainland and Free Zone companies, branches of foreign companies, and certain partnerships 
  • Natural Persons: Applicable only where the aggregate annual revenue from licensed business activity exceeds AED 1 million during a year 
  • Foreign Entities: If they have a permanent establishment in the UAE or earn UAE-sourced income 

UAE Corporate Tax Rates 

The UAE has adopted a tiered corporate tax system: 

  • 0% on taxable income up to AED 375,000 (benefitting startups and small businesses) 
  • 9% on taxable income exceeding AED 375,000 
  • 15% for large multinational enterprises falling under OECD Global Minimum Tax (GloBE framework) 
  • Qualifying Free Zone Entities (QFZEs) benefit from a special regime: 
  • 0% tax on Qualifying Income, and 
  • 9% tax on income that does not qualify as Qualifying Income. 

This tiered approach ensures that small and growing businesses are supported, while aligning larger enterprises with international tax standards. 

Free Zone Companies and 0% Tax 

Qualifying Free Zone entities benefit from a 0% corporate tax rate on qualifying income, provided they meet the following conditions: 

  • Incorporated/registered in a Free Zone 
  • Maintain adequate economic substance in the Free Zone; 
  • Earn qualifying income as defined under the UAE corporate tax rules; 
  • Comply with transfer pricing requirements; and 
  • Meet the de-minimis requirements, where non-qualifying revenue does not exceed the lower of AED 5 million or 5% of total revenue. 
  • Not have been elected to be subject to standard Corporate Tax 
  • Prepare and maintain audited financial statements 

If any of these conditions are not met, the entity will be subject to the standard 9% corporate tax on applicable income. 

Taxable Income and Exemptions 

Taxable income generally includes: 

  • Accounting profits from financial statements 
  • Adjustments for non-deductible expenses, exempt income, and transfer pricing 

Exemptions apply to: 

  • UAE government entities 
  • Public benefit organisations 
  • Certain pension and investment funds 
  • Dividends and capital gains (subject to conditions) 

Corporate Tax Registration and Filing 

All businesses subject to UAE corporate tax must: 

  • Register with the Federal Tax Authority (FTA) via the EmaraTax portal 
  • File annual corporate tax returns 
  • Pay taxes on time and maintain proper records 

Non-compliance may lead to penalties and fines. 

Key Takeaways 

  • UAE corporate tax applies to all incorporated entities, regardless of profitability 
  • 0% tax applies to taxable income up to AED 375,000, while income above this threshold is taxed at the standard 9% rate. 
  • Qualifying Free Zone companies may benefit from a 0% tax rate on qualifying income, subject to compliance with applicable requirements. 
  • Compliance, planning, and accurate record-keeping are essential 
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