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Corporate Tax Services in UAE

Corporate Tax in UAE, also known as Corporate Income Tax or Business Profits Tax, introduced by the UAE Ministry of Finance, is a direct tax imposed on corporations and businesses’ net income or profit. This tax reform is designed to support small and medium enterprises by instituting an initial statutory tax rate of 9% on corporate profits exceeding AED 375,000. Profits falling below this threshold will be zero-rated.

Compliance with corporate tax regulations is obligatory for all eligible Taxable Persons in the UAE. This involves initiating corporate readiness and registration, filing annual tax returns, and maintaining accurate accounting records by statutory laws and regulations.

Whereas, the introduction of Corporate Tax in the UAE is aligned with the nation’s strategic objectives to facilitate growth and transformation. Leveraging its extensive network of double tax treaties, the UAE aims to establish a competitive corporate tax framework that adheres to international standards.

This move solidifies the UAE’s position as a premier destination for business and investment. The UAE Corporate Tax Code draws from global best practices and encompasses widely accepted concepts, ensuring clarity and ease of comprehension.

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What is the Corporate Tax Rate in the UAE?

The Corporate Tax rate in the UAE stands at 9% for Taxable Income exceeding AED 375,000, while Taxable Income below this threshold incurs a 0% rate of Corporate Tax.

Corporate Tax is applicable as follows:

Taxable Person Applicable Tax Rate
Natural persons and juridical persons 9% on Taxable Income exceeding AED 375,000
Qualifying Free Zone Persons 0% on Qualifying Income9% on Non-Qualifying Income
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What Constitutes a “Business” or “Business Activity” Under Corporate Tax?

Under the Corporate Tax Law in the UAE, the definitions of “Business” and “Business Activity” are pivotal in determining the tax liability of individuals and entities. These terms are instrumental in identifying those who qualify as Taxable Persons subject to UAE Corporate Tax.

The term “Business” encompasses any economic activity undertaken by an individual or entity, whether it is of a continuous or short-term nature. Crucially, it implies an intention to generate a profit and entails a structured and organized approach to the activity.

It’s essential to note that a Business or Business Activity, within the context of UAE Corporate Tax, doesn’t lose its identity based on its profitability.

Who Qualifies as a Resident Person for UAE Corporate Tax Purposes?     

Under UAE Corporate Tax, Resident Persons encompass companies incorporated in the UAE, including Limited Liability Companies, Private Joint Stock Companies, Public Joint Stock Companies, and other juridical entities that operate within the UAE. These entities are automatically classified as “Resident” Persons for UAE Corporate Tax purposes due to their incorporation in the UAE.

Additionally, natural persons engaged in a Business or Business Activity within the UAE are also considered Resident Persons for UAE Corporate Tax purposes.

Moreover, foreign companies can attain the status of Resident Persons for UAE Corporate Tax if they are “effectively managed and controlled” from within the UAE. Determining the effective management and control of a company entails evaluating various factors, including the location where the company’s board of directors makes strategic decisions that significantly impact the company.

Who Is Considered a Non-Resident Person for UAE Corporate Tax Purposes?

By the Corporate Tax Law, a juridical entity is classified as a Non-Resident Person if it is incorporated in a foreign country and its effective management and control occur outside the UAE. Natural persons are designated as Non-Resident Persons for UAE Corporate Tax purposes if they do not engage in a taxable Business or Business Activity within the UAE.

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How is Taxable Income Determined for UAE Corporate Tax?

Taxable Income for a given Tax Period is calculated as the accounting net profit or loss of the Business, with adjustments made for specific items specified in the Corporate Tax Law and relevant implementing decisions.

The accounting net profit or loss corresponds to the amount reported in financial statements prepared by International Financial Reporting Standards (IFRS).

Adjustments to the accounting net profit or loss are required for various items, including:

  • Unrealized gains and losses (subject to the realization of principal election).
  • Exempt Income, such as qualifying dividends and capital gains.
  • Gains or losses arising from transfers within a Qualifying Group.

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What is a Tax Period Under Corporate Tax in the UAE?

Given that Corporate Tax is levied on an annual basis, it is crucial to establish the concept of the “Tax Period.” The Tax Period corresponds to the financial year utilized for preparing financial statements. Typically, this aligns with the Gregorian calendar year, running from January 1 to December 31.

However, businesses are permitted to adopt a different 12-month period for financial statement preparation, and in such cases, the Tax Period aligns with the chosen financial year.

Are Natural Persons Subject to UAE Corporate Tax?

Natural persons are subject to UAE Corporate Tax if they generate an annual Turnover exceeding AED 1 million from a ‘Business’ or ‘Business Activity’ within the UAE, as defined by the Corporate Tax Law and Cabinet Decision No. 49 of 2023.

Are UAE Holding Companies Subject to UAE Corporate Tax?

UAE holding companies are subject to UAE Corporate Tax. However, dividends received from domestic shareholdings are conditionally exempt, and dividends from foreign shareholdings and capital gains from both domestic and foreign shareholdings can be exempted if they meet the conditions of the Participation Exemption.

UAE corporate tax

What Is a Juridical Person Under Corporate Tax?

A “juridical person” is an entity established or officially recognized under the laws and regulations of the UAE or foreign jurisdictions. Such entities possess a legal personality distinct from their founders, owners, and directors.

Examples of UAE domestic juridical entities include limited liability companies, foundations, onshore trusts, public or private joint stock companies, and other entities with separate legal personalities under applicable UAE mainland legislation or Free Zone regulations.

Branches of UAE or foreign juridical entities operating within the UAE are considered extensions of their “parent” or “head office” and are not treated as separate juridical persons.

Who Is Exempt From UAE Corporate Tax?

Certain entities and individuals are automatically exempt from UAE Corporate Tax, while others may apply for exemption.

The exemptions include: 

Automatically Exempted Persons Exempted upon Application
The UAE Federal and Emirate Governments, along with their departments, authorities, and public institutions. Qualifying Investment Funds meeting prescribed conditions.
Companies wholly owned and controlled by a Government Entity conducting a Mandated Activity. Public or private pension or social security funds meeting conditions specified in Ministerial Decision No. 115 of 2023.
Businesses engaged in extracting UAE Natural Resources or related non-extractive activities are subject to Emirate-level taxation (subject to specific conditions). UAE juridical entities wholly owned and controlled by certain exempted entities, engaging in activities specified in Article 4(h) of the Corporate Tax Law.
Qualifying Public Benefit Entities listed in Cabinet Decision No. 37 of 2023 or subsequent relevant decisions.
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Will Small Businesses Receive UAE Corporate Tax Relief?

Small businesses with revenues of AED 3 million or below for the relevant Tax Period and preceding Tax Periods have the option to elect “Small Business Relief” for Tax Periods ending on or before December 31, 2026.

Choosing Small Business Relief means that a Taxable Person is treated as having no Taxable Income for the respective Tax Period and can enjoy simplified compliance obligations.

To claim Small Business Relief, an election must be made in the Taxable Person’s Corporate Tax Return for the relevant Tax Period.

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Who Qualifies as a Multinational Enterprise Group?

Multinational Enterprise Groups are groups of companies operating in multiple countries with a consolidated group revenue exceeding AED 3.15 billion. Members of such groups cannot apply for Small Business Relief.

Who is a Free Zone Person?

A Free Zone Person is a legal entity incorporated or established under the regulations of a Free Zone, or a branch of a mainland UAE or foreign legal entity registered in a Free Zone.

A foreign company relocating its place of incorporation to a UAE Free Zone also qualifies as a Free Zone Person.

The Free Zone Corporate Tax regime exclusively applies to Free Zone Persons and determines which income can benefit from the regime by treating income from transactions with other Free Zone Persons as Qualifying Income.

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Can a Foreign Company Benefit From the Free Zone Corporate Tax Regime?

A foreign company can register a branch in a Free Zone and take advantage of the Free Zone Corporate Tax regime for Qualifying Income attributable to that Free Zone branch.

Ownership restrictions or requirements do not prevent a Free Zone company from benefiting from the Free Zone Corporate Tax regime, even if it is wholly or partially owned by a foreign entity.

Are Family Foundations subject to UAE Corporate Tax?

Family Foundations and certain trusts are independent juridical entities with separate legal personalities. They are typically subject to UAE Corporate Tax.

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Are Investment Funds Subject to UAE Corporate Tax?

Investment funds are often structured as limited partnerships or other unincorporated vehicles to maintain tax neutrality for investors. This structure aligns with most countries treating limited partnerships as transparent entities for tax purposes, which ensures that investors are taxed as if they had invested directly in the fund’s underlying assets.

Investment funds structured as partnerships, unit trusts, or unincorporated vehicles are generally treated as fiscally transparent “Unincorporated Partnerships” for UAE Corporate Tax purposes.

However, investment funds structured as corporate entities, including Real Estate Investment Trusts (REITs), or partnership funds that choose to be treated as a “Taxable Person” for UAE Corporate Tax purposes, can apply for exemption from UAE Corporate Tax if they meet specific requirements.

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Guide to Corporate tax in UAE

Seek Expert Corporate Tax Services in the UAE

Engaging professional Corporate Tax Consultants is crucial to ensure compliance and navigate the complexities of taxation. Expert consultants can assist with tax planning, structuring, compliance, and more, ensuring that individuals and organizations meet their tax obligations while benefiting from applicable exemptions and legal strategies.

At Farahat & Co, our team of experienced corporate tax experts possesses a profound understanding of the intricate financial landscape in the UAE and upholds unwavering principles of integrity. Contact us today, and we shall be glad to assist you.

Frequently Asked Questions

What is Federal Corporate Tax in UAE?

Corporate Tax, also known as Corporate Income Tax or Business Profits Tax, is a direct tax imposed on the net income or profit of corporations and businesses.


Corporate Tax in UAE Applies to Which Persons?

UAE Corporate Tax applies to legal entities incorporated in the UAE, foreign entities effectively managed and controlled in the UAE, and foreign entities operating through a Permanent Establishment or having a taxable presence in the UAE.


Are Natural Persons Subject to UAE Corporate Tax?

Natural persons are subject to Corporate Tax if they engage in business activities in the UAE, either directly or through an Unincorporated Partnership or sole proprietorship.


What Are the Corporate Tax Rates in UAE?

The UAE Corporate Tax rates are as follows:

Taxable Person Applicable Rate
Natural persons and juridical persons 9% for Taxable Income exceeding AED 375,000.
Qualifying Free Zone Persons 0% on Qualifying Income and 9% on non-Qualifying Income


Who Are Exempted Persons Under UAE Corporate Tax?

Exemptions from UAE Corporate Tax include UAE Federal and Emirate Governments, certain government-owned companies, businesses involved in UAE Natural Resources extraction or related activities, and Qualifying Public Benefit Entities.


Who Can Apply for Exemption Under Corporate Tax in UAE?

Certain entities can apply for exemption upon approval, such as Qualifying Investment Funds, pension or social security funds, and UAE juridical persons wholly owned by exempted entities engaged in specified activities.


Who Can Get Small Businesses Relief Under UAE Corporate Tax?

Individuals investing in real estate in their capacity should be exempt from the UAE Corporate Tax if they are not required to get a commercial license or license to do such business in the UAE.

Who Should Register for Corporate Tax in UAE?

All Taxable Persons, including Free Zone Persons, must register for Corporate Tax and obtain a Corporate Tax Registration Number.

What Are the Required Documents for Corporate Tax Registration?

Documents required for Corporate Tax registration in the UAE include proof of address, company details, and audited financial statements showing the accounting period used for financial reporting, with any changes disclosed to the tax authority before filing tax returns.

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