For decades, the United Arab Emirates has been a tax haven for investors and businesses with its 0% tax rate. However, in December 2022, the UAE government announced its first-ever corporate tax regime with a corporate tax (CT) rate of 9%.
This new corporate tax came into effect for businesses with fiscal year starting on or after 1st June 2023 and applies consistently across all Emirates.
If you’re an entrepreneur, investor, or business owner with operations in the UAE, understanding and complying with the new corporate tax regulations is important for you to avoid any penalties.
This article will serve as your guide to understanding the corporate tax in the UAE to ensure your business remains compliant.
Who Needs to Pay Corporate Tax in UAE
As per the CT Law, the corporate tax in the UAE applies to all companies incorporated in the UAE and natural persons involved in business activities. Foreign companies are subject to UAE corporate tax if they have a significant physical presence in the UAE or derive income from their activities or assets in the UAE.
Some entities that are exempt from paying the UAE corporate tax include:
- UAE government entities and specific government-controlled entities
- Businesses engaged in extracting natural resources like oil, gas, and minerals have separate tax regulations established through concession agreements or fiscal letters.
- Qualifying public benefit entities dedicated to social welfare
- Qualifying investment funds such as Social Security fund
If your business falls under any of these exemptions, you must register for the corporate tax and then apply for exemption to the Federal Tax Authority of UAE. Without doing so, you will be subject to corporate tax on your taxable income and will not be considered for exemption.
UAE Corporate Tax Rate
According to the Federal Decree-Law No. 47 of 2022, the standard tax rate in UAE is 9% of the taxable income above AED 375,000 (approximately USD 102,000). If your taxable income is less than the defined threshold, your business will be subject to a 0% tax rate.
Companies established in the UAE free zones are also subject to a 0% tax rate as long as they meet the Qualifying Free Zone Person (QFZP) criteria and have qualifying income. (details below)
Similarly, individual business owners are subject to the 9% corporate tax on their taxable income only if their annual turnover is more than AED 1 Million. If their annual turnover is less than that, they are not liable to pay taxes.
Here is a summary of the UAE corporate tax rates:
| Taxable Person | Corporate Tax Rate |
| All Businesses (Including natural persons engaged in business activities) | – 0% on income up to AED 375,000 – 9% on income over AED 375,000 |
| Qualifying Free Zone Businesses (QFZP) | – 0% on qualifying income – 9% on all non-qualifying income |
One important thing to note is that regardless of whether you need to pay taxes, have no tax liability, or are exempt from them, you must register for corporate tax with the UAE Federal Tax Authority (FTA) and get your Corporate Tax Registration number. The administrative penalty for non-registration is AED 10,000.
UAE Corporate Tax for Free Zone Companies
The new corporate tax framework has specific considerations for companies operating in the UAE’s free zones. A free zone company can potentially benefit from the 0% tax rate on its qualifying income, provided it meets the criteria to be classified as a Qualifying Free Zone Person (QFZP).
What is a Qualifying Free Zone Person (QFZP)
A QFZP is a business entity registered within a UAE free zone that meets the following criteria set by the UAE Corporate Tax Law:
- Has significant operations within the free zone.
- Earns income primarily from qualifying activities carried out within the free zone or outside the free zone (Qualifying Income)
- Chooses not to opt for the standard UAE Corporate Tax system
- Follows strict transfer pricing rules for transactions between related companies.
- Maintains detailed records and financial statements
Note: To qualify for the 0% tax rate, a free zone company must first register for the corporate tax. Once you have the corporate tax number, you need to submit the application for Qualifying Person before your financial year ends.
Tax Compliance and Filing Requirements for Businesses in UAE
Businesses subject to corporate tax (CT) in the UAE have specific responsibilities to ensure compliance with the new regulations. These include:
- Registration: Companies must register for corporate tax with the designated authorities, such as the Federal Tax Authority (FTA). For new companies, the registration with tax authorities must be done within 3 months from the date of application of incorporation.
- Record-Keeping: Maintain proper accounting records that accurately reflect income and expenses, as well as supporting documentation for tax purposes.
- Tax Filing: Accurately file tax returns within the specified deadlines, which may include annual corporate tax returns, transfer pricing documentation, and other required filings.
- Tax Payment: Timely payment of any corporate tax due based on the filed tax returns.
Failure to comply with these requirements can result in penalties of up to AED 10,000 depending on the violation.
When to File Corporate Tax Returns in the UAE
Under Article 48 of the Federal Decree Law 47, businesses operating in the UAE are required to submit their corporate tax returns no later than 9 months after their fiscal year ends, unless a different timeline is specified.
Based on that, the upcoming corporate tax return deadlines for the financial year 2024 are as follows:
- For financial year July 2023 to June 2024, you need to file your corporate tax return by 31 March 2025
- If financial year is from January 2024 to December 2024, you need to submit return by 30 September 2025
Use our UAE corporate tax calculator to estimate your corporate tax returns
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