Services
Corporate Tax in UAE
Corporate Tax is a direct tax on a company’s net income or profits, also known in some jurisdictions as “corporate income tax” or “business profits tax.”
A competitive Corporate Tax system, aligned with international best practices, strengthens the UAE’s position as a global business hub and supports its strategic development goals. It also reflects the UAE’s commitment to tax transparency and the prevention of harmful tax practices.
Overview, Scope & Rates
The UAE Corporate Tax (CT) regime is effective for financial years starting on or after 1 June 2023.
Examples:
- A business with a financial year from 1 July 2023 to 30 June 2024 will be subject to CT from 1 July 2023.
- A business with a calendar year from 1 January 2023 to 31 December 2023 will be subject to CT from 1 January 2024.
Who will be subject to UAE CT?
UAE Corporate Tax applies to all businesses and commercial activities in the UAE, except for natural resource extraction, which remains taxed at the Emirate level.
How do you determine whether an individual has a “business” that will be within the scope of UAE CT?
An individual is generally considered to have a business under UAE CT if they hold or are required to obtain a license or permit to conduct commercial, industrial, or professional activities in the UAE.
How do you determine the business profit/income that will be subject to UAE CT?
Taxable income is based on a business’s accounting net profit, as reported in financial statements prepared under internationally accepted accounting standards, with adjustments as specified by UAE CT law.
The UAE Corporate Tax rates are:
- 0% on taxable income up to AED 375,000
- 9% on taxable income above AED 375,000
- A 15% rate for large multinationals meeting the OECD Pillar Two criteria (with global revenues of €750 million or more)
What is meant by “large” multinationals?
A “large” multinational refers to a corporation with operations in multiple countries through subsidiaries, branches, or other registered entities, and with consolidated global revenues over EUR 750 million (approx. AED 3.15 billion), as defined under the OECD Pillar Two rules. Simply earning income abroad without a foreign presence does not qualify a business as a multinational.
Will the income earned by a freelance professional be subject to UAE CT?
Yes, UAE Corporate Tax applies to income earned under a freelance license or permit. However, no tax is payable unless the annual net income exceeds AED 375,000.
If a business earns AED 400,000 in taxable income, the UAE CT payable is:
- 0% on the first AED 375,000 = AED 0
- 9% on the remaining AED 25,000 = AED 2,250
Total CT payable: AED 2,250, subject to reduction for any foreign taxes paid on the same income.
Will anyone be exempt from UAE CT?
Businesses involved in natural resource extraction are exempt from UAE CT and remain subject to Emirate-level taxation. Other exemptions and exclusions will be announced later.
Income Exempt from UAE CT
- Dividends and capital gains from qualifying shareholdings earned by a UAE business are exempt from UAE CT.
- A qualifying shareholding is an ownership interest in a UAE or foreign company that meets conditions set by UAE CT law.
- Qualifying intra-group transactions and reorganizations are also exempt, provided specific conditions are met.
Foreign Persons
- Foreign companies or individuals are subject to UAE CT only if they conduct trade or business in the UAE on an ongoing or regular basis.
- Income earned by foreign investors from dividends, capital gains, interest, royalties, and other investments is generally exempt from UAE CT.
Free Zones
- Free zone businesses are subject to UAE CT but can retain existing tax incentives if they meet regulatory requirements and don’t trade with mainland UAE.
- Free zone businesses must register and file a CT return. More compliance details will be shared later.
- UAE CT treatment is uniform across all free zones, including financial free zones.
Industry Sectors
- Oil, gas, and extractive industries remain subject to Emirate-level taxation and are excluded from UAE CT.
- Banking operations are subject to UAE CT; details on Emirate-level taxation will be provided later.
- Real estate businesses, including management, construction, development, agency, and brokerage, are subject to UAE CT.
Losses
- Businesses can use losses incurred from the UAE CT effective date to offset taxable income in future periods. A tax loss occurs when allowable deductions exceed income in a financial year.
- Excess losses can be carried forward to future years if certain conditions are met. More details on loss carry-forward rules will be provided later.
- Groups may offset losses from one company against another’s taxable income, subject to conditions. Further guidance on group loss rules will follow.
Tax Group
A group of UAE companies can choose to form a tax group and be treated as a single taxpayer if they meet certain conditions. The group will then file one consolidated tax return.
Withholding Tax
- Withholding tax is a tax deducted by the payer from payments like dividends, interest, or royalties on behalf of the recipient.
- Under the UAE CT regime, no withholding tax will apply to domestic or cross-border payments.
Tax Credits
Foreign corporate tax paid on UAE taxable income can be credited against the UAE Corporate Tax liability.
Transfer Pricing
- Transfer pricing rules ensure transactions between related parties are conducted at arm’s length, like between independent entities.
- UAE businesses must comply with transfer pricing rules and documentation requirements based on OECD guidelines.
Administration
- Businesses must register for UAE CT; details will be provided later.
- One CT return is filed per financial year; no advance or provisional filings required.
- CT returns must be filed electronically; further guidance to follow.
- No advance tax payments are required.
- Penalties will apply for non-compliance, similar to other UAE taxes; more details will be shared soon.
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