The introduction of UAE Corporate Tax marked a significant shift in the country’s business landscape. For years, the UAE was known globally for its zero-tax environment. While the UAE remains one of the most tax-efficient jurisdictions in the world, businesses now need to understand their obligations under the new regime.
What is UAE Corporate Tax?
UAE Corporate Tax (CT) is a federal tax on the net profits of businesses operating in the UAE. It applies to financial years starting on or after 1 June 2023. The standard rate is 9% on taxable income exceeding AED 375,000. Income below this threshold is taxed at 0%.
Who Does It Apply To?
- All UAE Mainland companies
- Free Zone companies (though Qualifying Free Zone Persons may benefit from a 0% rate on qualifying income)
- Foreign companies with a permanent establishment in the UAE
- Individuals conducting business activity in the UAE
Who is Exempt?
- Individuals earning employment income, investment returns, or real estate income in a personal capacity
- UAE government entities and wholly government-owned companies
- Qualifying public benefit entities
- Pension and investment funds (subject to conditions)
What is Qualifying Free Zone Income?
Free Zone companies can still benefit from a 0% Corporate Tax rate on qualifying income — provided they meet certain conditions, including maintaining adequate substance in the Free Zone, not earning income from UAE Mainland sources, and complying with transfer pricing rules.
What Do You Need to Do?
- Register for Corporate Tax with the Federal Tax Authority (FTA)
- Maintain proper financial records and prepare financial statements
- Calculate your taxable income and file your Corporate Tax return annually
- Ensure transfer pricing documentation is in place if you transact with related parties
Corporate Tax compliance is not optional, and penalties for non-compliance can be significant. One Desk’s tax team is here to help you register, plan, and file correctly from day one.