Understanding UAE Corporate Tax: What Businesses Need to Know

Corporate Tax or Corporate Income Tax is a direct tax levied on the net income of corporations and other businesses. It was introduced in the United Arab Emirates in the year 2022 with the implementation of Federal Decree-Law No. 47 of 2022. Corporate Tax implementation in UAE fosters the country’s commitment towards incorporating best tax practices globally and minimising compliance burdens. Understanding Corporate Tax laws in the UAE is essential for businesses in order to navigate the evolving financial landscape, ensure compliance, and enhance financial planning.

UAE Corporate Tax Rates for Businesses

• The standard UAE Corporate Tax rate that is applicable to the taxable income of businesses is 9%. This standard rate of 9% is applied to businesses with taxable income exceeding AED 375,000. In case of taxable income that does not exceed AED 375,000, a 0% Corporate Tax rate is applicable. 

• Corporate Tax Rate for Free Zones:

A Free Zone Person meeting certain conditions will be considered a Qualifying Free Zone Person and will be eligible for a 0% Corporate Tax UAE rate   on its qualifying income. This 0% taxable rate will be available to Qualifying Free Zone Persons until the expiry of the tax incentive period provided in the legislation of the relevant Free Zone (unless renewed). A taxable income that is not considered a Qualifying income will be subjected to a standard 9% rate of Corporate Tax for Businesses in UAE.

How to Comply with UAE Corporate Tax Regulations?

• UAE corporate tax return preparation

It is important for businesses to file their Corporate Tax returns efficiently and prepare accordingly. The financial statements must be prepared in accordance with Corporate Tax regulations to calculate accurate taxable income. The International Financial Reporting Standards (IFRS) are required to be followed when preparing financial statements for Corporate Tax. Businesses earning revenue less than AED 50,000,000 can apply for IFRS for SMEs. Taxable persons on meeting the relevant conditions can   apply for some of the provisions in corporate tax, including small business relief, business restructuring relief, and relief in relation to transfers within a qualifying group. 

• Corporate tax filing requirements in UAE

A taxable person is required to pay corporate tax and file their Corporate Tax return within 9 months from the end of the relevant Tax Period.  For example, if the financial year ends on 31 December, a taxable person is required to pay corporate tax and file their tax return on or before 30 September the following year. 

Tax Exemptions for UAE businesses

The following entities are exempted from Corporate Tax for Businesses in UAE:

• Government Entities 

• Extractive and Non-extractive Natural resource businesses

• Government Controlled Entities and Qualifying Public Benefit Entities

• Public and private pension and social security fund

• Juridical persons incorporated in the UAE that are wholly owned and controlled by certain exempt persons

Moreover, the following income are also exempted from UAE Business Tax:

• A natural person’s salary, wages, and other employment income

• Dividends and other profit distributions received from a resident person and foreign juridical persons (if the recipient has a participating interest in the foreign company)

• Other income and gains are exempted if derived from a participating interest

Impact of UAE Corporate Tax on SMEs

The Corporate Tax law has provided ‘small business relief’ to eligible businesses in order to reduce their corporate tax burden and compliance costs. The small business relief applies to a resident person (natural person and juridical person) who earns revenue equal to or less than AED 3,000,000 in both the current and all previous tax periods. The eligible taxable person can elect to be treated as having no taxable income in that period and thus would not be required to calculate its taxable income or complete a full tax return. According to the UAE tax laws, the election for small business relief has to be made in each tax period. A Qualifying Free Zone Person and a member of a multinational group with consolidated group revenue of more than AED 3.15 billion cannot apply for a small business relief.

Corporate Tax Incentives 

• Transfers within a Qualifying Group 

The UAE Corporate Tax Law provides relief for transfers within a qualifying group (where an asset or liability is transferred between members of a Qualifying Group). Taxable persons will be treated as members of the same qualifying group if certain conditions are met. 

• Small Business Relief

An eligible tax person can apply for small business relief provided by the Corporate Tax law. Small business relief is provided to businesses with revenue equal to or below AED 3,000,000 in a relevant tax period and all tax periods ending on or before 31 December 2026. These taxable persons can elect to be treated as deriving no taxable income for the relevant tax periods. 

• Business Restructuring Relief

Under the UAE Corporate Tax Law, when a business or part of a business is transferred for shares or other ownership interests, business restructuring relief can be applicable. This relief can eliminate the corporate tax impact as neither party will have to account for any gains or losses when calculating their taxable income. 

UAE Corporate Tax Deadlines 2024

FTA Decision No. 3 of 2024 specifies the deadlines for the registration of taxable persons for Corporate Tax purposes. The deadlines provided in this decision are applicable to Resident or Non-resident Natural and Juridical Persons. 

Pioneering Corporate Tax Consultants UAE: AMCA

AMCA distinguishes itself as reputed and trustworthy Corporate Tax consultants UAE, credited to our tailored solutions, unwavering commitment to client success, and exceptional Corporate Tax advice for UAE businesses. As a leading firm providing business tax advisory UAE, AMCA’s experts bring a wealth of experience in Corporate Tax planning for UAE businesses and guiding businesses towards seamless Corporate Tax compliance. With a proven track of success and delivering strategic advantages, AMCA is the trusted partner for businesses seeking to thrive in the complex UAE tax landscape and understanding UAE Corporate Tax.

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