Corporate Tax In UAE – All You Need to Know Before Filing
The United Arab Emirates has always attracted people who want to do business in a friendly and growing economy. The government of UAE introduced a new corporate tax law to build a strong, fair, and diverse economic system. This law started on June 1, 2023. UAE’s Federal Tax Authority (FTA) now asks businesses to pay corporate tax on profits. In this article, you will find important points about UAE corporate tax, who must pay, exemptions, free zone rules, filing steps, and how Mubarak Al Ketbi (MAK) Auditing can help your business with tax filing in Dubai, UAE.
Why Is Corporate Tax Important in the UAE?
Corporate tax is a tax that the UAE government collects on a company’s net profit. The main corporate tax rate in UAE is 9%. The UAE is a leading hub for international business. Many companies from all over the world want to set up in Dubai, Abu Dhabi, and other Emirates. The money collected from corporate tax helps the government pay for hospitals, schools, roads, and other public services.
Corporate tax is important for:
- Bringing money to the government for public services
- Creating fair competition between large and small businesses
- Making sure every business pays its fair share of tax
You can also read: How Corporate Tax Will Affect Your Business in the UAE?
Who Should Pay Corporate Tax in the UAE?
All businesses that make a net profit of more than AED 375,000 must pay corporate tax. If a company earns less than AED 375,000, it pays 0% tax. Only profits above this threshold are taxed at 9%. Companies that are registered or managed from the UAE need to pay this tax. Some companies in UAE free zones also fall under this rule if they do not meet special free zone conditions.
Key points:
- UAE companies with net profit over AED 375,000 pay 9%
- Companies earning less than AED 375,000 pay 0%
- Some free zone companies may pay 0% if they follow rules
How Do Businesses File for Corporate Tax in the UAE?
Businesses must first register under the Corporate Tax (CT) regime in UAE. After registration, each business receives a corporate tax registration number from the FTA. A business needs to file its tax return within 9 months after the end of its fiscal year. For example, if the fiscal year ends on December 31, the return is due by September 30 the next year.
Steps for filing:
- Register for corporate tax with the FTA
- Get your corporate tax registration number
- Prepare financial statements and calculate net profit
- File the return online within 9 months of fiscal year end
Which Incomes and Businesses Are Exempt from Corporate Tax?
There are some incomes and companies that do not have to pay corporate tax in UAE. The most important exemptions are:
- Individuals: Income from salaries, personal investments, or real estate is not taxed as corporate tax.
- Foreign investors: If they do not run a business in UAE, they do not pay corporate tax.
- Qualifying Free Zone businesses: Companies in free zones that follow all rules and only do allowed activities can keep their special tax benefits.
- Dividends and capital gains: Profits earned from shares or investments in other companies (qualifying holdings) are exempt.
- Certain intra-group transactions and company restructures are also exempt.
What Are Free Zones, and Why Are They Tax-Free?
The UAE has many free zones that attract international companies. A “Qualifying Free Zone Person” (QFZP) is a free zone company or branch that:
- Has enough presence in the UAE (substance)
- Earns allowed types of income (as per rules)
- Meets transfer pricing and reporting requirements
A QFZP pays 0% corporate tax. If it chooses, it can opt out and pay the normal corporate tax rate. If it fails to follow the rules, it will lose the 0% benefit.
How Is Corporate Tax Calculated in the UAE?
Corporate tax is calculated at 9% of the net profit shown in the company’s financial statements, but only for profit above AED 375,000.
Example:
- Net profit is AED 575,000.
- Tax is 9% on (575,000 – 375,000) = 200,000
- So, tax is AED 18,000
If a business makes less than AED 375,000, the tax is 0.
Some Businesses and Incomes Are Not Taxed
- Salaries and wages
- Personal investments not linked to a business
- Foreign companies not running business in UAE
- Profits of qualifying free zone firms
You can also read: Everything You Need to Know About Corporate Tax
How Mubarak Al Ketbi (MAK) Auditing Can Help
Mubarak Al Ketbi (MAK) Auditing helps businesses understand the new tax system. Our experienced team can guide you with:
- Registering for corporate tax
- Preparing financial records
- Calculating taxable profits
- Filing returns on time
- Answering your tax questions
- Helping with free zone rules
For more information:
- Visit our office at Saraya Avenue Building – Office M-06, Block/A, Al Garhoud – Dubai – United Arab Emirates
- Or contact/WhatsApp us at +971 50 276 2132
Remember, “Don’t put off till tomorrow what you can do today!” Get in touch before tax season causes any trouble.
