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Corporate Tax in the UAE

Corporate Tax (CT) stands as a fundamental component of fiscal policies worldwide, and the United Arab Emirates (UAE) is embracing this global trend as it navigates towards economic diversification and sustainable growth. CT, a direct tax levied on the net income or profits of corporations and entities, marks a significant milestone in the UAE’s fiscal landscape.

What Is Corporate Tax ?

Effective from the commencement of their first financial year beginning on or after 1 June 2023, businesses in the UAE will come under the purview of Corporate Tax. This transition signifies a pivotal moment in the UAE’s journey, aligning its fiscal policies with international norms and positioning itself as a robust player in the global economy.

The Benefits of Corporate Tax Compliance

Financial Stability

Compliance with Corporate Tax regulations provides businesses with a stable financial foundation, reducing the risk of unexpected liabilities and ensuring long-term sustainability.

Competitive Advantage

Businesses that comply with Corporate Tax regulations demonstrate reliability and transparency, gaining a competitive edge in the market and fostering trust among customers, investors, and partners.
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Strategic Decision - Making

By maintaining compliance with Corporate Tax regulations, businesses can make informed strategic decisions based on accurate financial data and projections, enabling better resource allocation and risk management.

Access to Funding

Compliance with Corporate Tax regulations enhances a business's credibility in the eyes of lenders and investors, improving access to financing options and reducing borrowing costs.

Legal Protection

Compliance with Corporate Tax regulations protects businesses from legal disputes and penalties, safeguarding their assets and reputation in the event of an audit or investigation.

Ethical Reputation

Demonstrating a commitment to Corporate Tax compliance reflects positively on a business's ethical values and corporate responsibility, attracting socially conscious consumers and fostering goodwill within the community.
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Government Support

Businesses that comply with Corporate Tax regulations may be eligible for government incentives, grants, or subsidies aimed at promoting economic growth and job creation, providing additional resources to fuel expansion and innovation.
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International Standing

Compliance with Corporate Tax regulations enhances a business's international reputation and credibility, facilitating global expansion opportunities and partnerships with foreign entities

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FAQs

Corporate Tax applies to the following entities:

  • UAE Companies and Juridical Persons: Including those incorporated or effectively managed and controlled within the UAE.

  • Natural Persons (Individuals): Engaged in business or business activities within the UAE, as specified by Cabinet Decision.

  • Non-Resident Juridical Persons: Foreign legal entities with a Permanent Establishment in the UAE.

  • Juridical Persons in UAE Free Zones: Subject to Corporate Tax but may qualify for a 0% tax rate under certain conditions.

Non-resident persons without a Permanent Establishment in the UAE may be subject to Withholding Tax (at 0%) on UAE-sourced income, collected at the source by the payer.

Natural Persons and Juridical Persons:

  • 0% for Taxable Income up to AED 375,000.
  • 9% for Taxable Income exceeding AED 375,000.

Qualifying Free Zone Persons:

  • 0% on Qualifying Income.
  • 9% on Taxable Income that is not Qualifying Income.

Individuals will be subject to UAE Corporate Tax if their annual turnover from a ‘Business’ or ‘Business Activity’ in the UAE exceeds AED 1 million.

Yes, UAE holding companies are subject to UAE Corporate Tax. However, dividends from domestic shareholdings are exempt without condition, and dividends from foreign shareholdings, as well as capital gains from both domestic and foreign shareholdings, are exempt, provided they meet the conditions of the Participation Exemption
For Tax Periods ending on or before December 31, 2026, UAE Resident Persons with revenue of AED 3 million or less in the current and previous Tax Periods can claim Small Business Relief. This includes natural persons and legal entities that are not part of a Multinational Enterprise Group operating in multiple countries with total consolidated group revenue exceeding AED 3.15 billion, or Qualifying Free Zone Persons. If the revenue of an eligible entity exceeds AED 3 million in any Tax Period, they are no longer eligible for Small Business Relief for that period and subsequent periods.

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