The Ministry of Finance of the United Arab Emirates (UAE) issued the Federal Decree-Law No. 47 of 2022 on 09th December 2022 to tax corporations and businesses. The Federal Tax Authority (FTA) stipulates that businesses are subject to 9% corporate tax from the start of the financial year commencing on or after 1st June 2023.
UAE became the fourth among the GCC countries to implement the federal corporate tax.
The corporate tax is intended to help the UAE accelerate its development and transformation, position the country as a world-leading hub for business, and ultimately achieve its strategic objectives. Further, the UAE government builds its corporate tax regime from best global practices and incorporates internationally accepted principles.
Let’s understand more about UAE corporate tax in detail.
Corporate tax is a direct tax levied on the profit or net income earned on business income of corporations and other entities. Corporate tax is also called corporate income tax or business profits tax.
This tax applies to all UAE businesses except those extracting natural resources, which will be continued to tax under emirate-level corporate taxation. However, foreign individuals and businesses will be subject to corporate tax only when they run a business or trade continuously or regularly in the UAE.
Further, UAE corporate tax applies equally to all categories of profits and other income reported in the financial statements.
The UAE corporate tax applies to the below taxable persons:
Further, the Corporate Tax Law applies on both residence and source basis.
The authorities will levy the corporate tax @ 9% on taxable income exceeding AED 375,000 w.e.f from 1st June 2023.
The below table explains the corporate tax rates:
Corporate Tax Rate
Resident taxable persons
|Taxable income is more than AED 3,75,000|
|Taxable income is less than AED 3,75,000|
Qualifying free zone persons
|Taxable income (other than qualifying income)|
The following categories of persons are considered residential taxable persons:
A person doing business in a free zone is a free zone person. However, a free zone person will be considered as a qualifying free zone person only when:
FTA exempts certain businesses or entities from corporate tax due to their importance and contribution to the UAE’s social fabric and economy.
The following persons are exempted from UAE corporate tax:
Type of exemption
|2||Exemption notified by the Ministry of Finance|
|3||Exemption listed in a cabinet decision|
|4||Applied for exemption and approved by FTA (subject to certain conditions)|
FTA has launched early registration under the corporate tax regime through the EmaraTax portal. Further, it explained that:
Recently, FTA invited all public joint stock companies and private companies (resident for corporate tax purposes) to register under the UAE corporate tax from 15th May 2023 onwards. However, this phase does not cover free zone persons. Further, corporate tax registration for other categories of taxable persons, such as natural persons, will open later.
In the digital transformation era, businesses in GCC countries, including UAE, are digitising books of accounts. The businesses shall move from managing books of accounts to automating them amid the Value Added Tax (VAT) introduction a few years ago and the upcoming corporate tax.
The books and financial statements are more critical for businesses as the net profit derived from financials becomes the basis for arriving at the corporate tax. Hence, businesses must maintain the data accurately to arrive at the corporate tax liability correctly.
1. Is corporate tax implemented in UAE?
Yes, the tax authorities in UAE plan to implement the corporate tax in UAE w.e.f 1st June 2023.
2. What is the corporate tax in UAE?
Corporate tax is levied on the net profit made by the businesses. It mandates companies to pay a specific percentage of profit as tax.
3. What is the corporate tax rate in UAE?
The corporate tax rate is at 9% in UAE. However, the corporate tax rate for net profit was up to AED 3,75,000 is 0%.
4. What is the difference between VAT and corporate tax?
Value Added Tax (VAT) is charged on the supply of goods or services. However, corporate tax is charged on the net profits of the business.
5. Is it mandatory to register under UAE corporate tax?
Federal Tax Authority (FTA) invited all public joint stock companies and private companies to register under the corporate tax from 15th May 2023 onwards. Further, the authority will open registration for other categories later.