This applies to most businesses operating in the UAE. The rate is set at a competitive 9% for taxable income exceeding AED 375,000 (around USD 102,000).
From registration to filing and advisory support, our corporate tax services help businesses in the UAE maintain compliance, reduce risks, and plan with financial clarity.
The UAE has implemented a new Corporate Tax system, applicable to businesses operating here starting June 1st, 2023. This tax on net business income boasts one of the world’s lowest rates and is designed to streamline compliance. The revenue generated will strengthen the UAE’s economic standing, while the system itself promotes transparency and adheres to international standards. Entrepreneurs can rest assured, as the UAE remains dedicated to supporting startups and small businesses
The UAE’s new corporate tax system has two main components:
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End-to-end corporate tax compliance, planning, and filings aligned with UAE regulations.
VAT registration, returns, advisory, and compliance to minimize risk and ensure accuracy.
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The corporate tax applies to a broad range of businesses and activities:
The United Arab Emirates (UAE) provides various exemptions and benefits within its corporate tax framework. Below is an overview:
Government entities and their controlled entities (as listed by the government).
Businesses involved in extracting natural resources (oil, gas, etc.) or related non-extractive activities.
The UAE’s new corporate tax system brings both opportunities and considerations for businesses operating in Free Zones and beyond. Here’s a simplified breakdown
The UAE intends to honor existing Free Zone benefits for companies that:
The UAE aims to attract MNCs with its competitive tax rates. This might seem counter-intuitive, but the UAE hopes its transparent and dynamic business environment will be a draw.
The corporate tax represents another step in the UAE’s rapid evolution. The government aims to diversify the economy beyond oil and gas and position itself as a tech and innovation hub. The UAE remains attractive to skilled professionals with tax-free salaries and personal investment income.
Here’s a simplified breakdown of who pays UAE corporate tax and what types of income are exempt:
Your salary, real estate income, investments, and other personal income (not related to UAE business) are not subject to corporate tax.
You’ll only pay tax on income directly earned in the UAE or from a permanent establishment (PE) in the country.
The tax applies to a company’s adjusted accounting net profit.
Companies operating in Free Zones can still qualify for tax benefits if they meet specific criteria.
Extraction of natural resources remains subject to separate emirate-level taxation (not corporate tax).
The tax applies to a company’s adjusted accounting net profit.
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No, not for personal income. Salary, rental income, investments, and other personal income (not related to business activity) are exempt.
Yes, for business income. If you have a commercial license and run a business in the UAE, you’ll likely be subject to corporate tax on your business income.
These partnerships are considered “transparent” for tax purposes. The income “flows through” to the individual partners, who are then taxed on their share of the profits, not the partnership itself.
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Maintain a substantial presence in the UAE (substance test)
Comply with all regulations set by their Free Zone authority
Capital items: Unrealized gains or losses on assets like buildings or equipment don’t affect taxable income.
Revenue items: Unrealized gains or losses on sales or purchases do affect taxable income.
To claim exemption, your UAE company must: Own at least 5% of the shares in the subsidiary company. The foreign subsidiary must be subject to corporate tax (or a similar tax) at a rate of at least 9%.
UAE companies can choose one of two options: Claim a foreign tax credit for taxes already paid in the foreign branch country. Elect for an exemption on their foreign branch profits.
Certain expenses cannot be deducted from your taxable income, including: Payments made to related parties in a Free Zone with a 0% tax rate on that income. 50% of entertainment costs for customers, shareholders, suppliers, etc. Administrative penalties, recoverable VAT, and donations to non-approved charities.
Certain expenses cannot be deducted from your taxable income, including: Payments made to related parties in a Free Zone with a 0% tax rate on that income. 50% of entertainment costs for customers, shareholders, suppliers, etc. Administrative penalties, recoverable VAT, and donations to non-approved charities.
Yes, tax losses can be carried forward indefinitely, but with conditions:
Shareholder Continuity: At least 50% of the company’s shares must be held by the same shareholders throughout the period when the loss is incurred and when it’s used to offset future taxable income.
Change in Ownership: If ownership changes by more than 50%, losses can still be carried forward if the new owners continue the same or a similar business.
Listed Companies: Continuity requirements don’t apply to businesses listed on a recognized stock exchange.
Audits are not mandatory solely for corporate tax. Existing company laws determine audit requirements. However, Free Zone companies seeking the 0% CT rate will need to have audited financial statements.
Businesses must maintain financial and other records that support the information in their CT return and other documents submitted to the Federal Tax Authority (FTA). This also applies to certain exempt entities to verify their exemption status.
Tax returns and supporting schedules must be submitted to the FTA within nine months of the end of the relevant tax period.
To avoid double taxation, the UAE offers a “Foreign Tax Credit.” This allows companies to credit taxes paid in a foreign country against their UAE CT liability on foreign-sourced income that hasn’t been otherwise exempted.
The maximum foreign tax credit is the LOWER of: The tax paid in the foreign country. The UAE CT is payable on the foreign-sourced income.
No. Only foreign tax credits can be used forward or back to other tax periods. There’s also no mechanism for getting a refund on unused credits.
