- Corporate Tax Definition
- Corporate Tax is a federal tax imposed on the net profits earned by businesses.
- Applies to companies and natural persons conducting business activities exceeding a certain income threshold.
- Effective for financial periods starting on or after June 1, 2023.
- Who is Subject to Corporate Tax?
The following are subject to Corporate Tax:
- Resident legal persons, such as companies established or managed in the UAE.
- Non-resident legal persons if they:
- Have a permanent establishment in the UAE.
- Derive income sourced in the UAE.
- Earn income from immovable property in the UAE.
- Natural persons conducting business with annual revenues exceeding AED 1,000,000.
- Exemptions
Entities exempt from Corporate Tax include:
- Government entities and their controlled bodies.
- Public benefit organizations, subject to specific conditions.
- Natural resource activities, taxed locally by the emirate.
- Certain pension and social security funds, if requirements are met.
- Tax Rates
- 0% on the first AED 375,000 of taxable income.
- 9% on taxable income exceeding AED 375,000.
- Special rates apply to Qualifying Free Zone Persons on Qualifying Income only.
- Taxable Income
- Calculated based on accounting net profit, with certain adjustments under the law.
- Exempt income includes:
- Dividends.
- Income from foreign permanent establishments.
- International shipping/airline income.
- Taxpayer Obligations
Corporate taxpayers must:
- Register with the Federal Tax Authority (FTA).
- File an annual return within 9 months of the end of the financial period.
- Maintain accounting records for 7 years.
- Submit audited financials when required.
- Reliefs and Benefits
- Small Business Relief for eligible businesses.
- Option to form a Tax Group and file a consolidated return.
- Ability to carry forward tax losses for future offset.
- Free Zones – Special Treatment
- Qualifying Free Zone Persons may benefit from a 0% rate on qualifying income.
- Must comply with Economic Substance and other regulatory conditions.
Conclusion
The UAE Corporate Tax Law marks a shift toward a modern, transparent taxation system.
Timely registration, proper documentation, and compliance with filing deadlines are essential to avoid penalties.
