What is corporate tax in the UAE?

## What Is Corporate Tax in the UAE?

The UAE introduced a federal corporate tax on business profits effective 1 June 2023. Prior to this date, the UAE had no federal corporate income tax (though some banking and oil sector entities paid emirate-level taxes).

Corporate tax in the UAE is administered by the Federal Tax Authority (FTA) and is governed by the UAE Corporate Tax Law (Federal Decree-Law No. 47 of 2022).

## Corporate Tax Rates

| Profit Level | Rate | |-------------|------| | Up to AED 375,000 | 0% | | Above AED 375,000 | 9% | | Qualifying Free Zone income | 0% | | Large multinationals (Pillar Two) | 15% minimum |

The UAE's 9% rate is one of the lowest corporate tax rates globally among countries with a modern corporate tax system.

## Who Is Subject to UAE Corporate Tax?

UAE corporate tax applies to:

• **UAE-resident juridical persons** (companies and partnerships) incorporated in the UAE, whether mainland or free zone
• **Non-resident juridical persons** with a permanent establishment in the UAE
• **Natural persons (individuals)** conducting business activities in the UAE above a certain turnover threshold (expected AED 1 million or more)

Exempted entities include: - UAE government entities - Qualifying public benefit organisations - Qualifying investment funds - UAE-resident persons deriving income from UAE natural resources subject to emirate-level taxation - Qualifying pension or social security funds

## The 0% Threshold: AED 375,000

The first AED 375,000 of taxable income in any tax period is taxed at 0%. Above that, the 9% rate applies to the entire amount above the threshold (not just the excess).

For a company with AED 600,000 in taxable income: - First AED 375,000: 0% = AED 0 - Remaining AED 225,000 at 9% = AED 20,250 - Total corporate tax: AED 20,250

## What Is Taxable Income?

Taxable income is broadly the accounting net profit, adjusted for specific items:

Deductible: - Normal business expenses (salaries, rent, professional fees) - Depreciation of business assets - Interest expense (with thin capitalisation rules limiting deductibility at 30% of EBITDA for related-party debt) - Entertainment expenses (50% deductible)

Non-deductible: - Fines and penalties - Certain distributions to equity holders - Expenses related to exempt income - Bribes and illicit payments

## Pillar Two and Large Multinationals

For multinational enterprise groups with global consolidated revenue exceeding AED 3.15 billion (approximately €750 million), the UAE applies the OECD Pillar Two global minimum tax rules. These businesses face a minimum effective tax rate of 15%.

This Pillar Two framework applies regardless of whether the business is structured on the mainland or in a free zone.

## Registration and Filing

All businesses subject to UAE corporate tax must register with the FTA, even if their taxable income falls below AED 375,000 and they expect to pay zero tax.

Tax period: Generally follows the financial year of the business. Most businesses use the calendar year (January to December).

Filing deadline: 9 months after the end of the relevant tax period. For a December year-end, the corporate tax return is due by 30 September of the following year.

Payment deadline: Same as the filing deadline.

## Small Business Relief

Businesses with revenue below AED 3 million may elect for Small Business Relief, effectively paying 0% corporate tax regardless of profit level. This relief is available through 31 December 2026 (see separate guide).

## Transfer Pricing

Transactions between related parties must be conducted at arm's length. The UAE follows OECD transfer pricing guidelines. Documentation requirements apply to businesses above certain thresholds.