Does every branch need a separate tax registration?

No. The parent company files one CT return for all its branches in and outside the UAE.

Can a UAE company claim a tax exemption for branch profits earned abroad?

Yes, if the branch pays enough tax in its country, but this exemption is permanent once chosen.

What is a foreign tax credit?

It’s a credit for tax paid in another country by a UAE branch, used to lower UAE CT owed.

Are Free Zone branches always tax-exempt?

No. Only some Free Zone branches qualify for special tax incentives, depending on their activities.

Who can help with CT for company branches?

Mubarak Al Ketbi (MAK) Auditing helps with all your CT questions, filings, and compliance needs.

CT Applicability on Branches of Companies in UAE

The UAE started a new federal corporate tax (CT) system in June 2023. This change affects every business, including branches of both foreign and UAE companies. The government wanted to make the tax system fairer, increase its income, and follow global standards.

Now, the UAE taxes business profits at a rate of 0% for net profits below AED 375,000 and 9% for net profits above this level. Every business must learn about these rules and follow them to stay legal and avoid trouble.

Corporate Tax for Branches of Foreign & UAE Companies

A branch in the UAE works as an extension of its parent company, not as a separate legal person. Most branch transactions are also parent company transactions. So, branches don’t need to make separate financial statements for CT purposes. When companies file their CT returns, they must include every branch and all their transactions.

If a foreign company owns a branch in the UAE, and that branch has a Permanent Establishment (PE), it must pay CT, unless it qualifies for an exemption.
UAE companies with foreign branches also have special rules to follow, mainly to stop double taxation.

You can also read: Corporate Tax for Foreign Companies With PE in UAE

Main Rules for CT on Branches

Companies sometimes feel confused about how the CT law works for branches. Let’s make it simple:

A branch is part of its parent company, not a new legal person.
The parent company files one CT return for all branches.
Every branch, whether inside or outside UAE, follows the parent company’s tax filing.
Both foreign and UAE companies with branches in UAE must pay CT, unless exempt.
Branches in Free Zones may get special tax incentives or exemptions.

Tax for UAE Company Branches Outside UAE

UAE companies with branches in other countries face some challenges. They must pay tax in the country where the branch is located, but they can use these two options:

1. Branch Profit Exemption

Companies can claim a branch profit exemption for all their branches abroad.
Once they choose this, they can’t change back (it’s irrevocable).
They must show the branch pays enough tax in its country; otherwise, the exemption won’t work.

2. Foreign Tax Credit

If a UAE company has a branch outside the country, it may have paid tax there.
The company can get a tax credit for the foreign tax it paid, lowering its UAE CT bill.
The credit is the smaller amount between the foreign tax paid and the UAE CT owed on that income.
Unused tax credits can’t be carried to another year or refunded.

You can also read: Transfer Pricing Rules in Corporate Tax

Tax for Foreign Company Branches in UAE

Foreign companies with branches in UAE must:

Register for CT if their UAE branch is a PE.
File their CT as part of the parent company’s single return.
Follow the same rules as UAE companies, unless they get Free Zone incentives.

Free Zone Branches & Exemptions

Branches set up in UAE Free Zones may get tax benefits. These benefits depend on the Free Zone’s rules and the activities the branch does. Not all Free Zone businesses qualify, so always check the current rules.

Important Things to Remember

A branch is not a new company; it’s part of its parent.
Every company files just one CT return for all its branches.
Exemptions and credits help avoid double taxation, but there are rules.
Free Zones can have different rules and incentives.
Stay updated on the latest regulations.

How Mubarak Al Ketbi (MAK) Auditing Can Help You

Mubarak Al Ketbi (MAK) Auditing can help your business understand and manage CT for branches in and out of the UAE. Our expert team gives advice about every part of the CT law. We’ll guide you with exemptions, tax credits, and Free Zone rules, so you never miss a thing. We can save you time, money, and worry. Remember, “A stitch in time saves nine!”—so reach out before you have a tax problem.

For more information, visit our office:
Saraya Avenue Building – Office M-06, Block/A, Al Garhoud – Dubai – United Arab Emirates
Or contact/WhatsApp us at +971 50 276 2132