The introduction of corporate tax in the United Arab Emirates (UAE) marks a transformative step in the nation’s fiscal and regulatory landscape. Traditionally known for its business-friendly tax environment, the UAE has adopted a formal corporate tax regime to align with international standards and to ensure sustainable economic growth. If you’re a business owner or entrepreneur in the UAE, understanding the basics of this new system is critical to ensuring compliance and financial planning.
In this beginner’s guide, we will explain what corporate tax is, how it applies in the UAE, who is subject to it, what exemptions exist, and what steps your business needs to take to remain compliant under the new law.
What is Corporate Tax?
Corporate tax is a direct tax imposed on the profits of businesses. It is based on the net income or profit generated by a legal entity during a specific financial period. The tax is calculated after deducting all allowable business expenses from the total revenue.
Corporate tax is widely used across the globe as a means for governments to raise public revenues. With its implementation, the UAE joins a long list of countries that require businesses to contribute a share of their profits to public coffers.
Why Did the UAE Introduce Corporate Tax?
There are several reasons for this shift:
- To align with global tax standards such as the OECD’s Base Erosion and Profit Shifting (BEPS) initiative
- To diversify national income beyond oil and government fees
- To strengthen regulatory transparency and build investor confidence
- To ensure fairer competition in the business environment
Introduced under Federal Decree-Law No. 47 of 2022, the UAE’s Corporate Tax came into effect for financial years starting on or after 1 June 2023.
What is the UAE Corporate Tax Rate?
- 0% on taxable income up to AED 375,000 (to support small businesses and startups)
- 9% on taxable income exceeding AED 375,000
- 15% for certain large multinational enterprises (MNEs) that fall within the scope of Pillar Two of the OECD BEPS framework
This makes the UAE one of the most competitively taxed jurisdictions globally, particularly for small and mid-sized enterprises.
Who is Subject to Corporate Tax in the UAE?
Corporate tax applies to:
- UAE-incorporated companies and other juridical persons
- Foreign companies with a permanent establishment in the UAE
- Free Zone entities (unless they meet the qualifying criteria for exemption)
- Businesses engaged in extractive industries (subject to Emirate-level taxation)
However, natural persons (i.e., individuals) will be subject to corporate tax only if they are conducting a business activity under a commercial license and meet the income threshold.
Entities Exempt from Corporate Tax
Some organizations and activities are exempt, including:
- Government entities
- Wholly government-owned UAE companies
- Extractive businesses (oil, gas, minerals)
- Qualifying Free Zone Persons (if they comply with specific regulations)
- Charities and public benefit organizations
- Pension and investment funds
What is a Qualifying Free Zone Person?
Free Zone businesses can still benefit from 0% corporate tax on qualifying income, provided they:
- Maintain adequate substance in the UAE
- Earn qualifying income (such as exports or intra-Free Zone trade)
- Comply with transfer pricing rules
- File audited financial statements
Failure to meet these requirements will lead to a 9% tax rate on total income.
PEAK Business Consultancy Services – Simplifying Tax Compliance
Corporate tax may be new in the UAE, but you don’t have to navigate it alone. PEAK Business Consultancy Services specializes in helping startups, SMEs, Free Zone entities, and large enterprises comply with VAT and Corporate Tax regulations in the UAE.
Our team offers corporate tax registration, impact assessment, tax planning, and ongoing compliance support. Visit www.peakbcs.com to learn how we can help you meet your tax obligations with confidence and clarity.
When and How to Register for UAE Corporate Tax
All businesses subject to corporate tax must register with the Federal Tax Authority (FTA), even if they expect to be within the 0% threshold. Registration is done through the EmaraTax online portal.
Key requirements:
- Trade license
- Passport/Emirates ID of owners
- Memorandum of Association
- Financial statements (audited, if applicable)
Corporate Tax Return Filing and Payment
Businesses must file an annual corporate tax return within 9 months from the end of their financial year. The same deadline applies for tax payment.
For example, if your financial year ends on 31 December 2024, your tax return and payment are due by 30 September 2025.
Allowable Deductions and Taxable Income
Taxable income is calculated by subtracting allowable deductions from total revenue. Common deductible expenses include:
- Salaries and wages
- Rent and utilities
- Advertising and marketing costs
- Professional services (legal, consulting, accounting)
- Depreciation and amortization
- Interest expense (within set limitations)
Non-deductible items include personal expenses, penalties, and donations not registered with public benefit status.
Transfer Pricing and Documentation
UAE Corporate Tax law includes strict transfer pricing requirements for businesses engaging in related-party transactions. This means your company must document and demonstrate that all inter-company dealings are at arm’s length.
Businesses above a certain revenue threshold must maintain a Transfer Pricing Documentation File and submit a Disclosure Form to the FTA annually.
Conclusion
The UAE’s corporate tax regime is designed to be simple, fair, and aligned with global practices. Whether you’re a small business or a multinational enterprise, understanding the rules and planning ahead is essential for compliance and competitiveness.
PEAK Business Consultancy Services is here to guide you through every step — from registration and calculation to filing and audit readiness. Let our experts take the stress out of taxation so you can focus on what matters most: growing your business.
Visit www.peakbcs.com to book your free consultation and begin your journey to corporate tax compliance today.
