Corporate Tax in Dubai: Practical Taxability Guide for Businesses
Dubai builds a modern tax system with clear rules. The UAE issues a federal corporate tax across all emirates. The framework starts for tax periods on or after 1 June 2023. Your company reads the decree. Your company follows the guidance from the Federal Tax Authority (FTA) and the Ministry of Finance (MoF). The law sets a small-profits relief at lower levels. The law then applies a 9% rate above the profit threshold. The system is competitive by design. The system also expects good records, timely filing, and sound governance.
1) The Policy Shift and What It Means
Dubai carried a low-tax image for years. The federal corporate tax changes that view. The change doesn’t hurt business spirit. The change supports transparency and long-term growth. Investors still see a stable base. Founders still see a fast market. Banks still see clean numbers in audited accounts. The city uses tax to fund services. The city keeps rates modest to attract capital.
Your company should map the first Tax Period. Your company should check FTA clarifications for non-standard first periods. Some groups set a financial year from 1 Jan to 31 Dec. Some groups use a different year. The starting point decides your first return due date. A company with FY 1 Jan–31 Dec 2024 files by 30 Sep 2025. The nine-month rule sets that date. You plan with that date on your calendar.
2) Who Falls Inside the Net
Most resident juridical persons fall into scope. Non-residents with a permanent establishment (PE) in the UAE also fall into scope. Natural persons with business turnover over AED 1,000,000 in a Gregorian year can fall into scope. The FTA issues specific registration timeframes by taxpayer type. New incorporations receive windows for registration. Non-residents with PEs receive windows after they create presence. You confirm your category. You file the registration on time.
Key points you can use
- A government entity can sit outside scope if the law exempts it.
- Extractive and non-extractive sectors can have special regimes.
- A Qualifying Free Zone Person (QFZP) can access a 0% rate on qualifying income.
- A normal Free Zone Person that doesn’t qualify applies standard rules.
3) What Profit Gets Taxed
The tax applies to net profit after adjustments. Your books show accounting profit. Your tax pack converts it to taxable income. Your team makes add-backs and deductions per law. You exclude exempt income. You segregate non-deductible items. You compute the taxable base. The first AED 375,000 of taxable profits benefits from 0% under the small-profits relief (subject to the election and conditions). The profit above that threshold faces 9%. Very large multinational groups can face extra rules under Pillar Two instruments such as a Domestic Minimum Top-Up Tax (DMTT) from financial years starting on or after 1 Jan 2025. Affected groups should review MoF/FTA materials and align systems early.
4) Free Zones and the Qualification Path
A Free Zone sits as a special jurisdiction. The zone issues trade licenses. The zone hosts logistics, services, manufacturing, and finance. A Free Zone Person must still register for corporate tax. A QFZP can apply 0% on qualifying income when conditions hold. A QFZP keeps substance in the UAE. A QFZP follows transfer pricing and documentation rules. A QFZP does not elect into normal taxation. If the entity fails a condition in a period, the entity can lose QFZP status from the start of that period. The entity then applies 9% on taxable income for that period, and for later periods per incentive window rules.
What often decides the rate
- Qualifying activities: Defined by law or decisions.
- Non-qualifying streams: Certain mainland dealings or excluded activities.
- De-minimis tests: Tolerance levels for non-qualifying income.
- Branches: A mainland branch pays 9% on branch profits.
5) Registration and First Compliance Cycle
You confirm your category. You complete the corporate tax registration. You receive your account. You set your first return period. You set your due date. You appoint a responsible officer. You draft a compliance calendar with VAT, ESR, and transfer pricing. You gather data monthly, not only at year-end. You lock prior periods in your ERP to protect audit trails. You train staff on evidence and retention.
A simple monthly cadence
- Reconcile revenue and cost by segment.
- Tag exempt and taxable streams in ledgers.
- Review related-party margins for arm’s-length range.
- Update fixed-asset registers and tax depreciation bridges.
- Track small-profits relief status and threshold headroom.
6) Computing the Taxable Base
You start from accounting profit. You apply tax adjustments that the law requires. You exclude exempt dividends where applicable. You add back non-deductible fines or penalties. You check interest limitation rules if thresholds apply. You test deductibility for donations and sponsorships. You compute tax-written-down values on assets. You capture loss carryforwards when valid and within caps. You complete a clear bridge from the trial balance to the return lines.
Documentation your file should include
- A tax computation memo.
- Working papers for each adjustment.
- Contracts and invoices for major items.
- A signed management representation on data completeness.
7) Losses, Caps, and Fair Use
A loss arises when allowable expenses exceed taxable income. The law can allow carryforward against future profits. Some regimes cap usage in each period so the base never drops to zero. Your team should respect caps where they apply. Your team should keep a loss continuity schedule with opening balance, movement, and closing balance. Your team should track changes in ownership and business continuity because those factors can limit loss use in many systems. Good records protect reliefs.
8) Transfer Pricing and Intragroup Fairness
Related-party pricing can change your taxable result. The UAE applies the Arm’s Length Principle. Your company should prepare Master File and Local File if it meets thresholds. Your company should sign intercompany agreements with functions, risks, and assets aligned. Your company should pick a method and test margins with defensible comparables. Customs values and transfer pricing should align when goods move across borders. Files should be ready before the statutory deadline.
Do this to stay ready
- Map each related-party transaction type.
- Assign a pricing method with a clear rationale.
- Build local benchmarking with tested screens.
- Reconcile tested results to the financials.
9) VAT, ESR, and Financial Statement Links
Corporate tax sits with VAT and Economic Substance Regulations (ESR). Your VAT returns show supplies and input tax. Your ESR filings show core income-generating activities, people, premises, and expenditure. Your corporate tax return should align with both. Audited financial statements support all three. The board should approve the numbers. The notes should explain segments and policies. Transparent disclosures build trust with banks and investors.
10) Natural Persons Who Run a Business
Some individuals run sole businesses or freelance platforms. A natural person with business turnover over AED 1,000,000 in a Gregorian year can be required to register. The person then files a return on net business income after allowable costs. Personal employment income sits outside scope. Personal investment income can sit outside or inside scope depending on rules. The person should check FTA guidance and keep clean books for the business activity.
11) Deadlines, Penalties, and How to Avoid Them
The first return is due nine months after the end of your tax period. Payments follow similar timing. Penalties can apply for late registration, late filing, late payment, and poor records. Penalties can also apply for incomplete transfer pricing documentation. You avoid penalties with a structured calendar, early drafting, and internal reviews. You also avoid penalties with tidy schedules and quick responses to queries.
A short control list helps
- Confirm registration status and portal access.
- Freeze trial balance before computations.
- Run a second-pair review on the tax pack.
- Keep signed minutes that approve the filing.
12) Free Zone Examples That Clarify Outcomes
Zone exporter with foreign customers:
A Free Zone company manufactures goods and sells to foreign buyers. If the activity meets qualifying lists and substance holds, the income can be qualifying. The rate can be 0% on that stream.
Zone service firm with mainland clients:
A Free Zone company sells services to mainland customers without a branch and without a carve-out. That stream can be non-qualifying. The 9% rate can apply above the threshold.
Zone entity with a mainland branch:
The branch profits face 9%. The head office keeps separate accounts. The return discloses the split by stream to support the treatment.
13) Governance and EEAT for Your Tax Footprint
Search engines reward clear expertise and trustworthy content. Regulators reward clear systems and consistent controls. Your company should show Expertise with qualified staff and advisors. Your company should show Experience with real operations in the UAE. Your company should show Authority with signed policies and audited numbers. Your company should show Trust with on-time filings and open communication. A short governance paper can state roles, calendars, and escalation paths. Your board can revisit the paper each year.
14) Technology That Reduces Friction
Modern ERPs can tag revenue by location and customer type. Modern tools can map direct and indirect costs to segments. A tax engine can compute adjustments and create return files. A document hub can store contracts, invoices, and transfer pricing studies. Dashboards can track thresholds, deadlines, and alerts. You save time. You reduce risk. You support scale without heavy headcount.
17) Why Work With a Specialist
Rules evolve. Processes shift. Portals update. A specialist reads each change and updates your approach. Mubarak Al Ketbi (MAK) Auditing supports your team with policy notes, computation packs, and transfer pricing files. We help you split qualifying and non-qualifying streams. We help you build calendars, controls, and narratives that pass review. You gain speed and certainty while you focus on customers.
What Can Help — Mubarak Al Ketbi (MAK) Auditing
Mubarak Al Ketbi (MAK) Auditing guides your Dubai tax setup with simple steps. We review your structure with care. We map your income with clarity. We prepare your returns with accuracy. We train your staff with checklists. We turn complex rules into easy actions. The ball is in your court now, and we’re ready to move when you are.
- Visit our office: Saraya Avenue Building – Office M-06, Block/A, Al Garhoud – Dubai – United Arab Emirates
- Contact / WhatsApp: +971 50 276 2132
