FAQs on Corporate Tax in UAE

The Ministry of Finance (MoF) manages and develops the financial resources of the United Arab Emirates (UAE) government. Accordingly, it introduced the corporate tax to enhance the UAE’s development and transformation and accomplish its strategic objectives.

1. What is a corporate tax?

A corporate tax is a tax on the business income of an entity. It is similar to a person paying income tax. Many countries worldwide impose such taxes on national and state levels.

2. Is there a corporate tax in the UAE?

The Ministry of Finance (MoF) of UAE announced on 31st January 2022 that they will implement a new federal corporate tax system w.e.f 1st July 2023 or 1st January 2024. The corporate tax implementation date depends on the financial year followed by the business. UAE businesses must register under corporate tax whenever the MoF announces to do so.

3. What is a tax period in UAE?

Generally, UAE businesses follow the Gregorian calendar year (1st January to 31st December) as a tax period. However, the tax period will change if a business applies a different 12-month period to prepare the financial statements. Suppose a business follows a financial year starting from 1st May; the tax period will be from 1st May to 31st April.

4. What are the UAE’s corporate tax objectives?

The objectives of the UAE’s corporate tax are:

• Becoming a leading hub for business and investment in the world
• Driving development and transformation to achieve its strategic objectives.
• Maintaining international standards for tax transparency and controlling harmful tax practices.

5. How to calculate corporate tax in UAE?

Corporate tax is calculated on the company’s taxable income or net income. The taxable income is also known as net earnings or net profits. You must calculate income generated from all the revenue sources. Further, operating expenses, interest, depreciation, amortisation, etc., must be deducted from total income to arrive at the net income.

6. What is the corporate tax rate in UAE?

The Federal Tax Authority (FTA) decided the corporate tax in UAE @ 9% with some exceptions. Businesses with net or taxable income are AED 375,000, or more must pay the corporate tax.

7. Must every business in UAE pay corporate tax?

Small businesses with taxable income less than AED 375,000 don’t have to pay corporate tax.

8. What are the exceptions to corporate tax in UAE?

The UAE’s corporate tax applies to all businesses operating in the seven emirates. However, below are some exceptions:

• Businesses operating in the natural resources extraction industry
• Businesses registered in Free Trade Zones who do not operate businesses with Mainland UAE
• Individuals, unless the employment income comes from business, professional engagement, commercial, freelancing, or any other activities that need a permit or license.
• Individuals earn from real estate investments invested in a personal capacity but not as a business.
• Individuals earn dividends and capital gains from personal investments in securities and shares.
• Individuals earn income and interest from savings and deposit accounts.

9. What are the different tax slabs under UAE corporate?

Ministry of Finance notified below tax rates in UAE:

• Taxable income up to AED 375,000: 0%
• Taxable income of AED 375,000 or more: 9%

Also, large multinationals will be charged different tax rates if they meet specific criteria under the OECD Base Erosion and Profit Shifting Project.

10. Who will be in charge of the corporate tax in the UAE?

The Federal Tax Authority (FTA) will oversee the corporate tax’s administration, collection, and enforcement.

11. Will foreign individuals or companies have to pay the corporate tax?

Foreign individuals and companies will be subjected to corporate tax if they do business or conduct trade in the UAE regularly or continuously.

12. Will the income gained by a foreign investor come under the corporate tax?

A foreign investor’s income gained from interest, dividends, capital gains, royalties, and other investment returns will not be subject to corporate tax.

13. What is the corporate tax rate for UAE businesses established in a free zone?

Businesses established in a free zone that meet the conditions will be classified as ‘Qualifying Free Zone Persons’ and are subjected to the following corporate tax rates:

• Qualifying income: 0%
• Income other than qualifying income: 9%

14. Shall I pay corporate tax apart from VAT in the UAE?

Yes, you must pay VAT and corporate tax if you are a registered business for Value Added Tax (VAT). However, you may still have to pay the corporate tax even if you have not registered under VAT.

15. Can I deduct VAT while computing the income under corporate tax law in UAE?

You can deduct only irrecoverable input VAT while arriving at the net taxable income under the corporate tax. In other cases, VAT charged on sales and VAT paid on purchases would not impact the net taxable income.

16. How to prepare for corporate tax in UAE?

You must keep the following points in mind while preparing for corporate tax:

• You must understand the corporate tax law and regulations available on the MoF) and the FTA websites.
• Further, you shall do a Business Impact Analysis (BIA) using the below questions:
  • Whether your business must register under UAE corporate tax?
  • What is the tax or accounting for your business?
  • What is the due date for filing corporate tax returns in UAE?
  • What documents should you keep for UAE corporate tax purposes?
  • How corporate tax impacts your business contracts with customers and suppliers?
  • What financial information and records must you keep under UAE corporate tax?
• Regularly check the official websites to keep yourself updated on corporate tax law.
• Enable your team on corporate tax applicability and business implications.