Corporate Tax

Corporate Tax

  • About Corporate Tax: Corporate tax (CT) is a direct tax levied on the net income or profit of corporations and other entities from their business activities. This tax contributes to government revenue and is used to fund public services and infrastructure development. The introduction of corporate tax aligns the UAE with global tax standards, promoting transparency and sustainable economic growth.
  • The UAE Corporate Tax Regime: Introduced as the UAE's first federal CT regime, effective for financial years beginning on or after June 1, 2023.
  • This regime marks a transition from the UAE’s reputation as a tax-free business environment, part of a strategic move to align with international tax standards and strengthen its economic framework.
  • Key Features of the UAE Corporate Tax Law:
  • Tax Rates:
    • 0% Rate: Applicable to taxable income up to AED 375,000 and qualifying income of Qualifying Free Zone Persons (QFZP).
    • 9% Rate: Applicable to taxable income exceeding AED 375,000 and non-qualifying income of QFZP.
  • Legislative Framework: The Corporate Tax Law was introduced under Federal Decree-Law No. (47) of 2022, published on December 9, 2022, to provide clarity and ease of compliance for businesses and foreign investors.
  • Taxable Persons: Corporate tax applies to:
    • UAE companies: Juridical persons incorporated or effectively managed in the UAE.
    • Non-resident entities: Those with a permanent establishment in the UAE.
    • Natural persons: Individuals conducting business activities in the UAE.
  • Exemptions: Certain entities are exempt from corporate tax, including:
    • Government entities and controlled entities.
    • Extractive businesses (oil and gas).
    • Qualifying public benefit entities and investment funds.
    • Wholly-owned subsidiaries of exempt entities.
  • Compliance Requirements: Businesses must:
    • Register for corporate tax and file returns annually.
    • Maintain adequate records for a minimum of seven years.
    • Prepare audited financial statements as per International Financial Reporting Standards (IFRS) if required.
  • Filing and Payment: Corporate tax returns must be filed within nine months after the relevant financial year's end. For companies with a fiscal year ending December 31, the first return will be due by September 30, 2025, with any corporate tax payable also due within this timeframe.