Corporate Tax In The UAE – What To Do and What To Know?

The UAE will introduce corporate tax at nine per cent from June 1, 2023, setting a threshold of Dh375,000 profit for the companies.

In January 2022, Ministry of Finance announced that it will introduce federal Corporate tax (CT) on the net profits of businesses. The tax will become applicable either on 1 July 2023 or on 1 January 2024, depending on the financial year followed by the business. CT will be applied across all the emirates.

The Federal Decree-Law No. (47) of 2022 Taxation of Corporations and Businesses – 09 December 2022.

What is Corporate Tax?

Corporate Tax is a form of direct tax levied on the net income of corporations and other businesses.

Corporate Tax is sometimes also referred to as “Corporate Income Tax” or “Business Profits Tax” in other jurisdictions.

What is the Scope of UAE CT and Who is Subject to Comply?

Broadly, Corporate Tax applies to the following “Taxable Persons”:

UAE public Joint Stock Company – subject to UAE CT
UAE private Company (and an Establishment) – subject to UAE CT

Juridical persons established in a UAE Free Zone are also within the scope of Corporate Tax as “Taxable Persons” and will need to comply with the requirements set out in the Corporate Tax Law. However, a Free Zone Person that meets the conditions to be considered a Qualifying Free Zone Person can benefit from a Corporate Tax rate of 0% on their Qualifying Income (the conditions are included in [Section 14]).

Non-resident persons that do not have a Permanent Establishment in the UAE or that earn UAE sourced income that is not related to their Permanent Establishment may be subject to Withholding Tax (at the rate of 0%). Withholding tax is a form of Corporate Tax collected at source by the payer on behalf of the recipient of the income. Withholding taxes exist in many tax systems and typically apply to the cross-border payment of dividends, interest, royalties and other types of income.

Who is exempt from Corporate Tax?

Certain types of businesses or organizations are exempt from Corporate Tax given their importance and contribution to the social fabric and economy of the UAE. These are known as Exempt Persons and include:

CT Rate

As per Ministry of Finance, CT rates are:

Percentage of Tax	Taxable Income
0%	Taxable income up to AED 375,000
9%	Taxable income above AED 375,000 and
A different tax rate (not yet specified)	For large multinationals that meet specific criteria (OECD Base Erosion and Profit Shifting Project)

Federal Tax Authority (FTA) will be responsible for the administration, collection and enforcement of the CT. FTA will soon provide more references and guides about corporate tax and information on how to register and file returns on its website.

Effectivity

The UAE CT regime will become effective for financial years starting on or after 1 June 2023.

A business that has a financial year starting on 1 July 2023 and ending on 30 June 2024 will become subject to UAE CT from 1 July 2023 (which is the beginning of the first financial year that starts on or after 1 June 2023).
A business that has a financial year starting on 1 January 2023 and ending on 31 December 2023 will become subject to UAE CT from 1 January 2024 (which is the beginning of the first financial year that starts on or after 1 June 2023).

Corporate Tax FAQs