The introduction of corporate tax in the UAE has marked a new era for businesses operating in one of the world’s most dynamic economies. While the UAE remains a highly attractive business hub with competitive advantages and investor-friendly policies, understanding the new corporate tax regulations is essential for every company to stay compliant and strategically prepared.
What Is Corporate Tax?
Corporate tax is a direct tax imposed on the net income or profit of corporations and other business entities. In the UAE, this system was introduced to align with international tax standards, enhance transparency, and support the country’s long-term economic growth.
When Was Corporate Tax Introduced in the UAE?
The UAE Corporate Tax Law (Federal Decree-Law No. 47 of 2022) came into effect on 1 June 2023. From this date onward, businesses operating in the UAE became subject to federal corporate tax on profits exceeding a specific threshold.
Corporate Tax Rates in the UAE
The UAE’s corporate tax regime is designed to remain competitive and business-friendly. The current rates are as follows:
0% on taxable income up to AED 375,000
9% on taxable income exceeding AED 375,000
Different rates may apply to large multinational companies that fall under the OECD Pillar Two rules (with consolidated global revenues exceeding EUR 750 million).
At TrustMark Auditors LLC, we specialize in helping businesses across the UAE with corporate tax registration, compliance, and advisory services.
Mr Akhtar
Who Is Subject to Corporate Tax?
Corporate tax applies to:
UAE companies and other legal entities incorporated or effectively managed in the UAE
Foreign companies with a permanent establishment in the UAE
Individuals conducting business activities under a commercial license
However, certain entities remain exempt, including:
Government entities and wholly government-owned companies
Extractive and non-extractive natural resource businesses (subject to specific conditions)
Qualifying public benefit entities
Qualifying investment funds
Pension or social security funds
Free Zone Businesses and Corporate Tax
Businesses operating in UAE Free Zones enjoy special tax benefits — but with conditions.
A “Qualifying Free Zone Person” can benefit from a 0% corporate tax rate on qualifying income, provided they:
Maintain adequate substance in the UAE
Earn qualifying income (as defined by the Cabinet Decision)
Comply with transfer pricing regulations
Do not elect to be subject to corporate tax at the standard rate
However, non-qualifying income (such as mainland-sourced income) is taxed at 9%.
Taxable Income Calculation
Taxable income is generally the accounting profit (net profit or loss) of the business, as shown in its financial statements, after making certain adjustments for tax purposes. This includes:
Deductions for allowable expenses
Adjustments for exempt income
Carry-forward of losses (subject to conditions)
Businesses must maintain proper accounting records and file annual tax returns electronically with the Federal Tax Authority (FTA).
Corporate Tax Compliance Requirements
Every taxable person must:
Register for corporate tax with the FTA.
File a corporate tax return within nine months from the end of the relevant financial year.
Maintain audited financial statements, if applicable.
Comply with transfer pricing documentation requirements.
Failure to comply may result in penalties imposed by the FTA.
How Businesses Can Prepare
To ensure compliance and optimize tax planning, businesses should:
Review corporate structures and assess tax obligations.
Identify qualifying and non-qualifying income.
Maintain proper financial records and documentation.
Seek professional guidance to structure operations tax-efficiently.
Proactive preparation can help avoid unnecessary risks and take advantage of available exemptions and incentives.
Why Corporate Tax Is a Positive Step
While corporate tax introduces a new compliance responsibility, it strengthens the UAE’s global reputation for transparency and fiscal sustainability. The system ensures:
Alignment with international tax standards
A fair contribution to national development
Enhanced investor confidence in the UAE’s regulatory framework.
Final Thoughts
Corporate tax in the UAE is a significant change — but also an opportunity. With expert guidance, businesses can navigate the new system smoothly and even turn it into a strategic advantage.
Understanding your obligations, planning effectively, and staying compliant will help your company continue to thrive in the UAE’s growing and resilient economy.
