UAE Corporate Tax: Your Essential Guide to Compliance
For decades, the UAE has been a global magnet for businesses, celebrated for its dynamic economy and tax advantages. This landscape underwent a major shift with the official implementation of Corporate Tax in UAE from June 2023. This comprehensive guide, brought to you by The Smart Consultancy, is designed to help you navigate the new reality of the UAE’s tax system, covering rates, registration, and compliance.
Understanding the UAE Corporate Tax Law
What is Corporate Tax in UAE?
Also referred to as company tax or federal tax, Corporate Tax is a direct levy applied to the net income or profits of corporations and other business entities. Enforced by the Federal Tax Authority (FTA), the tax applies uniformly across all seven Emirates.
Introduced under Federal Decree-Law No. 47 of 2022, the UAE's Corporate Tax regime impacts both local UAE-based entities and foreign companies with operations in the country.
UAE Corporate Tax Rates & Structure
The Dubai Corporate Tax Rate and the wider UAE tax structure are strategically designed to bolster small businesses while ensuring fair contributions from larger enterprises:
| Taxable Profit Amount | Corporate Tax Rate | Key Consideration |
| Up to AED 375,000 | 0% | Small Business Relief threshold |
| Above AED 375,000 | 9% | Standard flat rate |
| Specific Sectors (Foreign Banks, Oil & Gas) | Up to 20% | Higher rates may apply to certain industries |
Furthermore, the law includes provisions for Multinational Enterprises (MNEs) that meet the OECD BEPS 2.0 framework (specifically those with global revenues exceeding AED 3.15 billion).
who is Classified as a Taxable Person?
According to the UAE Corporate Tax Law, a Taxable Person includes:
Resident Persons: Entities incorporated in the UAE, foreign companies effectively managed and controlled in the UAE, and natural persons with an annual income over AED 1 million.
Non-Resident Persons: Foreign entities with a Permanent Establishment (PE) in the UAE or those deriving specific UAE-sourced income.
Mandatory Corporate Tax Registration UAE
All taxable entities are required to complete Corporate Tax Registration in UAE with the FTA and secure a Corporate Tax Registration Number. This is mandatory for:
Mainland companies
Free zone entities (even if qualifying for 0% rate)
Branches of foreign companies
Sole establishments earning qualifying revenue
Compliance Deadline: Businesses must register before they file their first Corporate Tax Return.
Calculation and Compliance: Corporate Tax UAE
The calculation for Corporate Tax UAE is a straightforward process:
$$\text{Gross Revenue} - \text{Allowable Expenses} = \text{Taxable Income}$$
Allowable deductions include employee salaries, office rent, utilities, marketing costs, and depreciation. Businesses must maintain precise financial records in line with UAE GAAP or IFRS.
Corporate Tax in UAE Free Zones
Entities operating within designated Free Zones can potentially benefit from a 0% tax rate if they achieve Qualifying Free Zone Person (QFZP) status. This exemption hinges on them earning Qualifying Income from permitted activities and avoiding income from excluded activities or a Permanent Establishment outside the Free Zone. Crucially, Free Zone businesses must still register and file returns even if they are exempt from paying tax.
Special Exemptions and Small Business Relief (SBR)
The UAE Corporate Tax Law grants exemptions to specific entities (e.g., government bodies, qualifying public benefit entities, and qualifying investment funds).
To boost the SME sector, the Small Business Relief (SBR) provides a 0% tax rate for resident persons (mainland or free zone) with annual revenue up to AED 3 million (valid until December 31, 2026). This relief excludes holding companies and financial institutions and requires the filing of an SBR notification within the tax return.
Key Features of the UAE Corporate Tax Regime
9% Flat Rate: Applied to profits exceeding AED 375,000.
0% for SMEs and Free Zones: Supports micro-businesses and qualifying free zone entities.
Standard Fiscal Year: The tax applies to the financial year starting after June 1, 2023.
Deductible Expenses: Allowance for legitimate business costs.
Global Compliance: Adherence to international standards (IFRS) for transparency.
Penalties: Strict penalties for non-compliance with filing or payment deadlines.