The UAE released a new corporate tax law. The law is Federal Decree-Law No. 47 of 2022. The law applies to accounting periods that start on or after June 1, 2023. The law sets rules for who pays tax and how to file. The law defines reliefs, deductions, and refunds. This guide explains the core parts in simple steps. I keep sentences short. I follow a subject-verb-object style.
Who Must Register and Keep Records
Every taxable person must register for corporate tax. A taxable person must keep records for seven years after the tax period ends. The person must submit financial statements when the FTA asks. Both residents and non-residents can be taxable persons. A person in a free zone can also be a taxable person.
Qualifying Free Zone Person at a Glance
A qualifying free zone person can pay 0% corporate tax on qualifying income. The person must meet key tests. The person must not elect normal corporate tax. The person must earn qualifying income as per cabinet decision. The person must keep transfer pricing files. The person must follow the arm’s length principle. The person must keep enough substance in the UAE. If the person fails any test, the person can lose the 0% rate.
Who Counts as a Resident Person
A person is resident if the person is incorporated, formed, or recognized in the UAE. A person is also resident if the person is effectively managed and controlled in the UAE. A person in a free zone can be resident. A natural person who runs a business in the UAE can be resident. A resident person files tax in the UAE.
Who Counts as a Non-Resident Person
A non-resident person has no full residence but still has a link. The person can have a permanent establishment in the UAE. The person can earn UAE-sourced income. The person can have a nexus as per cabinet decision. A non-resident person pays tax only on the linked income.
How Unincorporated Partnerships Work
An unincorporated partnership is transparent by default. The law taxes the partners, not the partnership. The partners report their shares as taxable income. The partnership can apply to be treated as a taxable person. Article 16 allows this choice. The choice can help in some cases.
Income That the Law Exempts
Some income does not enter the tax base. Dividend income from a resident company is exempt. Profit from a qualifying Participating Interest can be exempt. The law explains the test for a Participating Interest. Income from a foreign permanent establishment can be exempt if set rules are met. Related expenses tied to exempt income are also excluded.
Reliefs That Reduce the Burden
Small Business Relief
A resident taxable person can claim small business relief if revenue stays under a set threshold. The Minister sets this threshold. The relief can reduce admin load. It can also set tax at zero in some years.
Tax Loss Relief
A taxable person can carry forward tax losses. The person can offset future taxable income with past losses. The law sets caps and rules to keep fairness.
Business Restructuring Relief
Two taxable persons can restructure. They can transfer assets and liabilities. They can ignore gains and losses if conditions are met. The relief supports mergers, spin-offs, and clean-ups.
Transfers in a Qualifying Group
Members of a qualifying group can move assets with no immediate tax. The group must meet ownership tests. The law can claw back relief if conditions break later.
Deductions You Can Take
Interest Expense Cap
A taxable person can deduct interest. The cap is generally 30% of EBITDA. The rule controls base erosion. The law can also set de minimis thresholds.
Entertainment Expense Limit
A business can deduct 50% of eligible entertainment costs. The rule avoids full write-off of leisure spending. The law lists exclusions.
Ordinary Deductible Costs
A person can deduct non-capital costs. The cost must be wholly and exclusively for business. The cost must arise in the tax period. Good records support the claim.
Forming a Tax Group
A UAE parent company can form a tax group with its subsidiaries. The parent must own at least 95% of share capital, voting rights, and profits. The parent files a single return for the group. The group is one taxable person for corporate tax. The parent and each member share liability for the group’s tax.
Getting a Corporate Tax Refund
A taxable person can seek a refund when tax paid is more than tax due. Extra withholding tax credits can trigger a refund claim. The FTA can also confirm an overpayment. The person files a request per the Tax Procedures Law. The person should keep proofs and reconciliations.
Practical Compliance Steps
- Map your legal entities and branches.
- Check if each entity is resident, non-resident, or free zone person.
- Review contracts for UAE-sourced income tests.
- Build transfer pricing files and policies.
- Track EBITDA for interest limits.
- Prepare a chart for group relief options.
- Set a calendar for filings and payments.
- Train staff to keep seven-year records.
Common Mistakes to Avoid
- A business ignores the registration deadline.
- A company claims 0% as a free zone person but fails substance tests.
- A group forgets to file proper elections.
- A taxpayer over-claims entertainment costs.
- A finance team books exempt income but also deducts related costs.
How Mubarak Al Ketbi (MAK) Auditing Can Help
We guide you with registration, grouping, pricing, and reliefs. We review your status as resident, non-resident, or free zone person. We build strong files for substance and transfer pricing. We prepare returns and support audits. We train your team and improve controls. We replace the need to chase many advisors. We make the path simple because the rules feel heavy. When push comes to shove, our team stands with you.
Visit or Contact
- For more information, visit our office: Saraya Avenue Building – Office M-06, Block/A, Al Garhoud – Dubai – United Arab Emirates
- Call or WhatsApp: +971 50 276 2132
