Corporate Tax in UAE

What is Corporate Tax?

Corporate Tax is a direct tax levied on the net profit or income of corporations and other businesses. In the UAE, the Corporate Tax Law was introduced under Federal Decree-Law No. 47 of 2022, and became effective from 1 June 2023.

The UAE corporate tax regime is aligned with global best practices, aiming to enhance the country’s reputation as a leading business and investment hub.

 

Applicability of Corporate Tax in UAE

Corporate Tax applies to:

• UAE-incorporated companies (LLCs, PSCs, PJSCs)
• Foreign legal entities with a permanent establishment in the UAE
• Free Zone entities (if they do not meet qualifying conditions)
• Individuals conducting business under a commercial license
• Partnerships and unincorporated joint ventures (depending on structure)

 

Who is Exempt from Corporate Tax?

The following are exempt persons under the Corporate Tax Law:

• Government and government-controlled entities
• Extractive and non-extractive natural resource businesses
• Public benefit entities approved by Cabinet
• Qualifying investment funds
• Pension or social security funds
• Wholly-owned UAE subsidiaries of exempt entities (subject to conditions)

 

Corporate Tax Rates in UAE

Taxable Income	Applicable Rate
0 – AED 375,000	0%
Above AED 375,000	9%
Large multinationals (OECD Pillar Two entities)	15% (expected)

Note: Small businesses may benefit from Small Business Relief (0% tax) if their revenue is ≤ AED 3 million (valid until 31 December 2026).

 

Effective Dates

Financial Year Start	Corporate Tax Applies From
1 June 2023	1 June 2023
1 January 2024	1 January 2024

 

Corporate Tax for Free Zone Companies

• Qualifying Free Zone Persons (QFZP) can benefit from a 0% corporate tax on:
• Income from transactions with other free zone persons
• Income from foreign customers
• Must meet specific conditions and maintain adequate economic substance in the UAE.
• Non-qualifying income will be taxed at 9%.

 

Requirements for Corporate Tax Compliance

1. Corporate Tax Registration (CTTR)
   • Mandatory for all taxable persons and exempt persons (except natural persons not conducting business).
   • Must obtain a Corporate Tax Registration Number.
2. Maintain Proper Accounting Records
   • Prepare audited financial statements (for some categories)
   • Comply with IFRS or IFRS for SMEs
3. File Annual Corporate Tax Returns
   • To be submitted within 9 months from the end of the financial year.
4. Payment of Corporate Tax
   • Due within 9 months after the end of the financial period.

 

Documents Required for Corporate Tax Registration

• Valid Trade License
• Emirates ID and Passport of owner/partners
• MOA/AOA (for companies)
• Contact details and bank info
• Financial Statements (if available)
• Lease agreement (Ejari)
• Details of business activities
• Existing tax registration (VAT TRN if applicable)

 

How to Register for Corporate Tax

Step-by-Step Process:

1. Login to FTA e-Services Portal (https://eservices.tax.gov.ae)
2. Navigate to Corporate Tax section
3. Click on "Register"
4. Fill in business information, license details, and upload documents
5. Submit application and wait for FTA approval
6. Receive Corporate Tax Registration Number (CTTRN)

 

Penalties for Non-Compliance

Violation	Penalty (AED)
Failure to register	10,000
Late filing of tax return	500 – 20,000 (based on days)
Failure to maintain records	10,000 – 50,000
Incorrect tax return	15% – 200% of tax difference
Late payment of tax	1% daily on unpaid tax

 

Corporate Tax vs VAT in UAE

Aspect	Corporate Tax	VAT
Type	Direct Tax	Indirect Tax
Basis	Net Profit	Value of Goods/Services
Rate	9% (above AED 375,000)	5%
Filing Period	Annually	Quarterly/Monthly
Applies to	Profit-earning businesses	Sellers of goods/services

 

FAQs

1. Is corporate tax applicable to all UAE companies?

          Yes, except exempt entities like government bodies, qualifying funds, etc.

2. When did corporate tax start in UAE?

          From 1 June 2023.

3. What is the standard corporate tax rate?

          9% on net profits exceeding AED 375,000.

4. Is corporate tax applicable to freelancers?

          Yes, if earning income under a commercial license.

5. Do I need to register for corporate tax if I'm not taxable?

          Yes, exempt persons may still be required to register (one-time) and obtain a CTTR.

6. What happens if I don't register for corporate tax?

          A fine of AED 10,000 applies.

7. Can small businesses get corporate tax relief?

          Yes, if annual revenue is ≤ AED 3 million, they can benefit from Small Business Relief until 2026.

8. Is corporate tax applicable to free zone companies?

          Yes, unless they qualify as QFZP and meet the necessary conditions.

9. Is corporate tax payable in advance?

          No, it is paid annually after filing returns.

10. Can I amend my tax return?

          Yes, but you must notify the FTA if errors exceed AED 10,000.

11. What is a Tax Period?

          It is the financial year (usually 12 months) for which corporate tax is calculated.

12. Do I need audited financials?

          Some companies, especially free zone entities, are required to maintain audited records.

13. Is partnership income taxable?

          Yes, if the partnership is treated as a taxable entity.

14. What are qualifying activities for Free Zones?

          E.g., Manufacturing, logistics, holding shares, and services to non-UAE clients.

15. Are dividends and capital gains taxable?

          No, if received from a qualifying shareholding.

16. Is foreign income taxed?

          No, unless it relates to a permanent establishment in the UAE.

17. How is income from real estate taxed?

          If real estate is not a business activity, it may be exempt.

18. Can I claim tax losses?

          Yes, losses can be carried forward and offset against future profits.

19. What’s a Tax Group?

          Two or more UAE companies can register as a group and file a single tax return.

20. How are transfer pricing rules applied?

          Businesses must comply with OECD-aligned transfer pricing guidelines.

21. Will there be advance tax payments?

          Currently, only annual payments are applicable (no advance tax model).

22. Do I need to deregister from corporate tax when closing business?

          Yes, you must file for deregistration and settle all liabilities.

23. Can natural persons register for corporate tax?

          Only if they earn income through a licensed business.

24. Is the tax paid to a UAE bank?

          Yes, via FTA-approved channels (GIBAN).

25. Is corporate tax deductible for accounting purposes?

          Yes, it is recorded as an expense in the income statement.