Everything You Need to Know About Corporate Tax
In January 2022, the UAE Ministry of Finance made a big announcement about bringing in Corporate Tax across the United Arab Emirates. The new law started on 1st June 2023. This tax is called Corporate Income Tax, and it gets charged on profits. The UAE isn’t the only country with this rule—countries like the US, India, France, Oman, Kuwait, and Qatar also have corporate tax. But the UAE has the lowest corporate tax rate among them, set at just 9%. At a G7 meeting, the Gulf countries agreed to a global minimum corporate tax of 15%, but the UAE still stands out for its lower rate.
The Federal Tax Authority takes care of collecting, managing, and enforcing Corporate Tax in the UAE. The Ministry of Finance deals with agreements and sharing information with other countries.
Bringing in corporate tax helps the UAE keep its economy strong and improve its business environment. With this step, the UAE wants to stay a top spot for global business and investment, follow international standards, and stop unfair tax practices.
Who Doesn’t Have to Pay Corporate Tax?
Some incomes and businesses don’t pay corporate tax in UAE. Here are the main ones:
- Individuals: Salary, real estate income, or investments by individuals (if not tied to a UAE business) aren’t taxed.
- Foreign Investors: If they don’t run a UAE business, they’re not taxed here.
- Free Zone Businesses: They keep their tax perks if they follow the rules.
- Dividends and Capital Gains: These are tax-free if received by UAE businesses from qualified shareholdings.
- Intragroup Transactions: Some group transactions and restructurings are exempt.
Who Must Pay Corporate Tax in UAE?
If your net profit goes over AED 375,000, you must pay corporate tax. All UAE companies—whether set up, managed, or controlled here—plus some free zone entities, have to pay. If the profit is below AED 375,000, the tax is 0%. The rules help startups and small businesses too.
Categories that Don’t Pay Corporate Tax:
- Natural resource companies (they pay tax at the emirate level)
- Dividends and capital gains from qualified shareholdings
- Certain intra-group transactions, if conditions are met
- Salary and employment income
- Bank interest and savings income for individuals
- Foreign investor’s investment income (dividends, interest, capital gains, royalties)
- People who own or trade shares on their own behalf
- Personal income from real estate
What Expenses Can Businesses Deduct for Corporate Tax?
Some business costs are allowed as deductions. Here are a few examples:
- Depreciation and amortization on capital assets
- Setup, license, and government fees paid for business activities
- Non-recoverable VAT amounts
- 50% of client entertainment expenses
- Interest on loans up to 30% of EBITDA
- Legitimate loans to related parties
- Payments to mainland branches by free zone entities
What Expenses Can’t Be Deducted?
Some costs can’t reduce your taxable profit. Examples include:
- Personal expenses
- Costs to get exempt income
- Losses unrelated to your business
- Any other expense the Cabinet may decide
UAE Corporate Tax Rates
- 0%: For taxable profit up to AED 375,000
- 9%: For taxable profit above AED 375,000
- Higher rate: (not announced yet) for big multinationals under OECD rules
How to Calculate and File Corporate Tax
Corporate tax is calculated every year. Each business must file a tax return with the Federal Tax Authority. The company uses its net profit before tax (from financial statements) as a starting point. Adjustments are then made for exempt income and non-deductible costs.
For example, if a business has a net profit of AED 575,000, the tax is calculated as follows:
- Taxable profit above AED 375,000 is AED 200,000.
- Corporate tax is 9% of AED 200,000, which is AED 18,000.
Filing and payment are done through a self-assessment process. Only one return is needed each year, and it must be filed electronically. No advance payments are required.
Financial Records Needed for Corporate Tax
Every business in the UAE must keep proper records for registration and filing. The Federal Tax Authority can ask for these at any time. Even if you are exempt, you must keep proof.
You need these documents:
- Trade license (not expired)
- Passport copies of owners/partners
- Emirates IDs of owners/partners
- Power of Attorney or Memorandum of Association
- Contact details (phone, email, address, PO Box)
- Annual financial audit report
Companies in a tax group can file one return for the group, if they meet certain requirements. Foreign taxes paid can count as credits against UAE tax due.
Corporate Tax for Free Zone Companies
Free zone companies must register and file tax returns. They may get special incentives but must meet all conditions. A “Qualifying Free Zone Person” (QFZP) is a business that meets all legal requirements, gets qualifying income, and follows transfer pricing rules. QFZPs can enjoy a 0% tax rate for eligible income.
Tips for Reducing Tax Burdens
Businesses can lower their tax bill by:
- Accelerating depreciation on assets
- Investing in tax-efficient assets (like corporate bonds)
- Claiming all eligible expenses
- Offering stock options and employee benefits
- Doing proper tax planning based on UAE law and business needs
Important Points Before Filing Corporate Tax
- Give accurate information to authorities
- Know all laws and court rulings
- Do tax planning under UAE rules
- Make your tax plans fit business goals
- Poor planning could mean you pay too much tax
How Mubarak Al Ketbi (MAK) Auditing Can Help
Why Choose MAK Auditing?
Mubarak Al Ketbi (MAK) Auditing helps you meet all corporate tax rules, keep your records up to date, and file on time. Our team gives you peace of mind—because when it comes to tax, it pays to have someone in your corner!
- For more information, visit our office: Saraya Avenue Building – Office M-06, Block/A, Al Garhoud – Dubai – United Arab Emirates
- Or contact/WhatsApp us: +971 50 276 2132
