The UAE introduces corporate tax to support a strong and transparent economy. The rule covers profits of legal persons and certain individuals who run businesses. The authority sets a low rate with a clear threshold. The framework protects the investment climate with simple steps. Your team reads the rules. Your team applies the rules with records and dates. Your leadership plans cash and filings with discipline.
The corporate tax applies to financial years that start on or after 1 June 2023. A company checks its first tax period with care. A company aligns its year with public clarifications for non-standard periods. A company registers with the Federal Tax Authority (FTA). A company files a return within nine months after year-end. The process looks manageable when you assign owners. The result supports trust with investors and lenders.
Purpose of Corporate Tax in the UAE
The government sets clear goals for this reform. The policy lifts the country’s profile as a reliable hub for trade. The policy aligns the system with global standards on transparency. The policy discourages harmful tax practices with fair rules. The policy diversifies revenue streams beyond oil. The policy builds a level field for large and small firms.
Your business benefits from clarity and predictability. Your investors see a mature framework. Your partners see risk controls in contracts and ledgers. The environment remains competitive with a low headline rate.
Scope: Who the Rules Cover
The law covers most resident juridical persons. The law also covers certain natural persons who carry on business activities. The law reaches non-residents with a permanent establishment or with sourced income that meets nexus tests. The law keeps incentives for Free Zone entities that meet qualifying conditions.
The scope also reaches common sectors in the region. Banking businesses sit inside the net. Real estate management, development, construction, agency, and brokerage sit inside the net. Foreign legal persons face the rules when they carry on regular or continuous business in the UAE. Each case turns on facts and documents. Your records should tell a consistent story.
Features: Rates, Thresholds, and Incentives
The framework sets a tiered rate with a threshold:
- 0% on taxable profit up to AED 375,000.
- 9% on taxable profit above AED 375,000.
- Separate outcomes may apply to very large groups under global minimum standards from financial years starting on or after 1 January 2025.
The design keeps the country attractive for investors. The design supports small profits with a cushion. The design keeps the rate simple for planning and pricing. Your team models scenarios with the threshold in mind. Your model updates bids, budgets, and dividends.
Free Zone Treatment: Incentives with Substance
Free Zones stay central to the country’s strategy. A Free Zone entity may qualify as a Qualifying Free Zone Person (QFZP). A QFZP pays 0% on qualifying income. A QFZP pays 9% on non-qualifying income. A non-QFZP pays 9% above the threshold on taxable profit.
A QFZP keeps a valid zone license. A QFZP maintains adequate presence in the UAE with people, premises, and costs. A QFZP earns income from listed activities that meet tests. A QFZP follows transfer-pricing rules and keeps files when thresholds trigger. If a QFZP breaches a condition in a period, the status falls away from the start of that period.
Your ERP tags each transaction by customer location, delivery point, and branch. Your contracts define scope and delivery with precision. Your reports show a split between qualifying and non-qualifying revenue. These controls protect the 0% benefit where rules allow it.
Exempt Persons and Exempt Income
The framework excludes several persons and incomes under conditions. Government entities sit outside scope in many cases. Certain government-controlled entities sit outside scope. Extractive industries may rely on separate regimes. Qualifying public benefit entities and certain investment funds can enjoy exemptions. Dividends and capital gains from qualifying holdings can sit outside the base under rules. Each exemption demands evidence and correct disclosures.
Your team lists each exemption with citations. Your team files support with the return. Your finance head keeps a register of elections and rulings. Clear notes reduce questions during review.
Tax Base: From Accounting Profit to Taxable Profit
Taxable profit starts from accounting profit under IFRS or approved standards. Then the company makes tax adjustments. The company removes exempt income. The company adds back non-deductible items. The company applies special rules for timing and valuation when required.
Typical adjustments include:
- Disallowance of certain fines and penalties.
- Capped amounts for specific entertainment costs.
- Treatment of fair-value movements under defined conditions.
- Reliefs for group steps and restructuring under rules.
Your computation links each line to a ledger and a document. Your file shows dates, amounts, and parties. Your reviewer follows the trail without guesswork.
Deductions: Ordinary and Necessary Costs
A company deducts ordinary and necessary business costs. Salaries, rents, utilities, and production inputs sit in the base. Marketing and technology costs sit in the base when incurred for business. Interest follows limitation rules where they apply. Related-party charges follow arm’s length outcomes. Each deduction requires proof and purpose. Your policy sets thresholds for invoices and contracts. Your approvers check that purpose matches the business.
Registration, Returns, and Payments
Every entity within scope registers with the FTA. Every entity files a corporate tax return electronically. The deadline falls nine months after the end of the financial year. A company with year-end 31 December 2024 files by 30 September 2025. The entity keeps records for the statutory period. The entity pays on time to avoid penalties.
Set a simple calendar:
- Close books and start audit within three months after year-end.
- Draft tax computation and transfer-pricing files by month five.
- Hold a board review by month seven.
- File and archive by month eight or nine.
A calendar reduces late-stage pressure. Roles and checklists reduce errors.
Administration: Roles of FTA and MoF
The Federal Tax Authority (FTA) runs daily administration. The FTA manages registration. The FTA receives returns and payments. The FTA enforces the law with reviews and penalties. The Ministry of Finance (MoF) manages international tax agreements and information exchange. The division of duties creates a clear channel for businesses.
Your company uses the FTA portal for registrations and returns. Your company keeps MoF updates on treaties and global rules. Your company aligns internal policies with both streams of guidance.
Economic Substance Regulations (ESR) and Corporate Tax
ESR demands real activity for relevant sectors. Corporate tax moves with the same spirit. A QFZP must prove substance with staff, with premises, and with costs inside the UAE. Board minutes show decisions made in the country. Payroll and leases support continuity. ESR filings match your tax claims. Consistent facts build credibility during review.
Transfer Pricing: Arm’s Length Principle
Related-party pricing must be arm’s length. Your policy describes functions, assets, and risks. Your benchmarks show ranges from independent data. Your intercompany agreements mirror the policy. Your invoices follow the agreements. Your files explain margin choices and allocations. Even if a small firm qualifies for simplified relief in some areas, the arm’s length principle still applies to behavior.
Group Relief and Restructuring Relief
The framework supports efficient group designs. Group Relief allows loss transfers and no-gain no-loss asset movements within conditions. Ownership and continuity tests apply. Restructuring Relief eases tax friction during mergers, splits, or internal transfers that meet rules. Carry-forward of tax losses can apply when continuity tests are met. Each step requires legal documents, valuations, and minutes. Your schedule fixes effective dates. Your ledger posts clean entries that trace to the tax file.
Foreign Tax Credits and Double Taxation
Foreign taxes paid on the same income may credit against UAE corporate tax under conditions. The credit can’t exceed the UAE tax on that income. Treaties may improve outcomes. Your team gathers foreign tax certificates. Your team links income streams to jurisdictions. Your team ensures no double benefit. A simple matrix avoids mistakes in the return.
Practical Controls for a Clean File
- Map customers by location and branch.
- Tag revenue as qualifying or non-qualifying where relevant.
- Reconcile accounting profit to the tax base monthly.
- Keep contracts and POs in a structured repository.
- Update transfer-pricing files before year-end.
- Maintain ESR evidence of people, premises, and costs.
- Approve computations with documented sign-offs.
These controls turn compliance into a routine. These controls reduce review time and cost.
Common Pitfalls and How to Avoid Them
- Late registration: Track entity life-cycle events and set alerts.
- Wrong Free Zone status: Re-test QFZP conditions each period.
- Weak documentation: Build files contemporaneously, not after notice.
- Siloed data: Integrate ERP tags with your tax mapping.
- Vague contracts: Specify delivery points and service locations.
- Missed deadlines: Use a calendar with backups and owners.
A short internal audit saves a long external review. A tight archive saves stress and penalties.
Simple Checklist for Finance Teams
- Confirm tax period dates and registrations.
- Choose any elections that fit your facts.
- Segment income correctly by activity and location.
- Prepare or refresh transfer-pricing files.
- Compile ESR documents for substance tests.
- Approve computations at management and board levels.
- File early and store the evidence pack.
Your team builds confidence with each cycle. Your board sees fewer surprises.
What Can Help — Mubarak Al Ketbi (MAK) Auditing
Mubarak Al Ketbi (MAK) Auditing helps your team understand the corporate tax rules and apply them with precision. Our advisors map your income, your costs, and your contracts to the correct outcomes. Our specialists prepare transfer-pricing files that match your functions and risks. Our auditors align ESR evidence with your operations. Our tax team builds your computation and files on time. We support Free Zone reviews, group steps, and restructuring moves. We guide your process so your finance team can focus on growth—because every cloud has a silver lining.
For more information (bullet points as requested)
- Visit our office: Saraya Avenue Building – Office M-06, Block/A, Al Garhoud – Dubai – United Arab Emirates
- Contact / WhatsApp: +971 50 276 2132
