Income Exempted from Corporate Tax in UAE
UAE attracts businessmen and individuals from all over the world. The tax system of the UAE makes it a top place for business and investment. UAE gives many financial benefits. You can see these in the form of a no-federal tax system, low VAT at 5%, and other reliefs. With the introduction of corporate tax in June 2023, people need to know which income is exempted from corporate tax in UAE.
This article will explain the income types that are not taxed under the UAE corporate tax system. The rules help both individuals and businesses save money and plan their finances.
List of Income Exempted from UAE Corporate Tax
Several kinds of income and some businesses are exempted from UAE corporate tax. Here is a list of these:
1. Income Earned by Individuals
- Individuals earning income in their personal name, from either private or public institutions, don’t pay UAE corporate tax.
- This rule does not apply if your source of income needs a commercial license.
- The exemption makes the UAE very attractive for job-seekers and professionals.
2. Foreign Income
- Income earned outside the UAE, by individuals or businesses, is not subject to UAE corporate tax.
- For example, if you live in Dubai but get a salary from a company in another country, that income is exempted.
3. Income from Investments
- Some investment earnings, like dividends, capital gains, or income from selling stocks, are excluded from taxable income.
- This rule helps investors keep more profits from their investments.
4. Income from Real Estate
- Individuals who earn money from real estate deals, like selling or renting property, are not taxed under UAE corporate tax.
- This includes all personal real estate transactions.
5. Free Zone Business Income
- Businesses that operate in UAE free zones don’t pay corporate tax, if they follow free zone rules.
- They must not do business in the UAE mainland and must comply with regulations of their free zone.
- This helps make free zones very popular for new businesses and foreign companies.
6. Income from Natural Resource Extraction
- Companies that extract oil, gas, or other natural resources are not covered by federal corporate tax.
- They pay taxes and royalties to their emirate’s government, not the federal government.
7. Participation Exemption (Article 23)
- If a company group pays dividends out of profits or earns money from selling shares within the group, that income is not taxed again.
- This is called “participation exemption.”
- The group must own at least 5% of the company for 12 months.
8. Foreign Permanent Establishment Exemption (Article 24)
- UAE residents with a business (or “permanent establishment”) outside UAE can choose to ignore income and losses from that foreign branch.
- They may also ignore any positive or negative income and related costs from that foreign branch.
- If they didn’t choose exemption, they may claim a foreign tax credit instead.
9. Income Earned by Non-Residents from Operating Aircraft (Article 25)
- Non-resident companies can get an exemption for income from operating or leasing aircraft or ships for international transport, if some conditions are met.
- These conditions include:
- The business is involved in international sea or air transport of goods, people, or equipment.
- Leasing equipment or chartering ships/aircraft for international use.
- The same tax treatment is given in the other country where the business is based.
Bullet List: Quick Look at Exempted Incomes
- Personal income (not business)
- Foreign income (outside UAE)
- Investment income (dividends, gains)
- Real estate deals (personal)
- Free zone business earnings
- Natural resource companies
- Group dividend/participation profits
- Foreign branch (permanent establishment) earnings
- Aircraft/ship operators (if conditions met)
Important Notes
- There may be specific limitations or exceptions based on individual circumstances or business type.
- Businesses must check if they meet all conditions for exemption before filing taxes.
- Not all income earned in the UAE will be exempt, especially for commercial activities or main business income.
How Mubarak Al Ketbi (MAK) Auditing Can Help
You don’t want to let the taxman rain on your parade! Mubarak Al Ketbi (MAK) Auditing gives you peace of mind by helping you figure out which income is exempt from corporate tax in UAE. Our expert team can:
- Guide you with personal and business tax exemption rules.
- Assist you in preparing documents for tax filing and registration.
- Advise you on free zone and foreign branch exemption.
- Support you in complex investment or group income scenarios.
For more information, please:
- Visit our office: Saraya Avenue Building – Office M-06, Block/A, Al Garhoud – Dubai – United Arab Emirates
- Or contact/WhatsApp: +971 50 276 2132
