🥇 What Is Corporate Tax in UAE? Explanation & Impact
What’s Corporate Tax in UAE?
Corporate tax is a direct tax the UAE government collects from the profit of companies and other businesses. The Ministry of Finance announced that this tax would start from June 1st, 2023. People sometimes call this tax “corporate income tax” or “business profit tax.” The law says UAE businesses must check their profit and pay tax if their net profit is above a certain level.
UAE Corporate Tax Rates
- If your net profit is up to AED 375,000: 0% tax
- If your net profit is above AED 375,000: 9% tax
- Different rules apply for big global firms, using OECD standards (Pillar 2 rules)
A company must calculate its net profit using international accounting standards. The taxable income is the net profit after making some adjustments set by UAE corporate tax law.
Here’s an example:
If your company’s net profit is AED 400,000, then:
- First AED 375,000: 0% tax
- Remaining AED 25,000: 9% tax = AED 2,250
- Total corporate tax: AED 2,250
How Does Corporate Tax Affect Businesses?
The corporate tax affects UAE businesses in many ways:
- Business Operations:
Companies must pay tax from their profit. This means shareholders get less profit. Some investors might think twice before making big investments because tax cuts into the returns. Companies might wait before opening new branches or making new plans to save money. - Working Capital:
Since tax is a short-term liability, companies have less money for daily work. This can slow down some business activities. Companies should always plan ahead and understand how tax will impact their cash and budget. - Business Structure:
The kind of company you have will affect how you pay tax.- Sole proprietors pay tax from all their earnings.
- Partnerships share the tax burden based on each partner’s share.
- Larger companies may have more options for planning.
What Measures Can Companies Take to Reduce Corporate Tax?
Companies can use different ways to manage and lower their tax bill, like:
- Choose Tax-Efficient Assets:
Invest in assets, plants, and machinery that offer tax benefits. - Claim All Business Expenses:
Always record and claim expenses—like rent, salaries, utilities—so taxable profit goes down. - Employee Schemes:
Offer stock options and benefits to employees, which are treated as expenses and reduce profit for tax. - Plan Carefully:
Good planning with expert help (like Mubarak Al Ketbi (MAK) Auditing) keeps tax bills in check.
How Does Corporate Tax Affect Free Zone Companies?
Free zone companies have special tax rules:
- Free zones are special business areas with their own licenses and rules.
- Most free zone firms don’t pay corporate tax for many years, if they only do business inside the free zone.
- If a free zone business trades with the UAE mainland or has profits over AED 375,000, it might have to pay 9% tax.
- Some free zone firms are part of multinational groups, so they must follow global tax rules (like OECD’s Pillar 2).
- Free zone companies can get benefits like no import/export duties and access to international trade deals.
To open a free zone company, you’ll need:
- Passport copies, visa stamps, address proof, and professional reference
- Bank letter and CV
- Company application form
The UAE has more than 40 free zones. These offer 100% foreign ownership and easy business setup. Many free zones let companies skip corporate tax for up to 50 years. Free zones also have their own rules for VAT and other taxes.
Key Points for UAE Companies Before Tax Filing
- Always give the correct info on tax forms.
- Learn the latest tax laws and court rulings.
- Make sure planning matches your company’s future goals.
- Do your planning inside the law and follow Ministry of Finance rules.
- Plan your tax early, not at the last minute.
How Mubarak Al Ketbi (MAK) Auditing Can Help
Mubarak Al Ketbi (MAK) Auditing supports every type of UAE company with tax planning, accounting, and business setup. Our team helps you stay safe and smart—because, as the saying goes, “a stitch in time saves nine.”
- For more information, visit our office:
- Saraya Avenue Building – Office M-06, Block/A, Al Garhoud – Dubai – United Arab Emirates
- Or contact/WhatsApp: +971 50 276 2132
