Corporate Tax Registration and Filing Made Easy

What Is Corporate Tax in the UAE?

Corporate tax is a direct tax imposed on the net profits of businesses operating in the UAE. This new framework came into effect on June 1, 2023, with most companies required to comply fully by January 1, 2024.

Background: Why Corporate Tax Was Introduced

The UAE has long been an attractive destination for entrepreneurs and investors due to its strategic location, political stability, modern infrastructure, and previously, a 0% corporate tax rate.

As the country continues diversifying its economy away from oil reliance becoming the fifth-largest economy in the Middle East (IMF) the introduction of corporate tax aligns the UAE with global fiscal standards while reinforcing its long-term sustainability.

Corporate Tax vs. VAT

While both are forms of taxation, corporate tax and VAT are fundamentally different:

• Corporate Tax is levied on the net profits of a business.

• VAT (Value Added Tax) is a consumption tax, applied to the sale of goods and services.

Corporate tax is mandatory for all eligible businesses, while VAT only applies once certain revenue thresholds are met.

Who Is Subject to UAE Corporate Tax?

Corporate tax applies broadly to UAE-based entities, including:

• Businesses incorporated or managed in the UAE.

• Individuals conducting business activities in the UAE.

• Foreign legal entities with a Permanent Establishment in the UAE.

Effective Dates:

• Financial years starting July 1, 2023 – taxation begins July 1, 2023.

• Financial years starting January 1, 2024 – taxation begins January 1, 2024.

Most commercial activities, including those in free zones, are subject to registration and tax filing, unless specifically exempted.

Corporate Tax Rates in the UAE

The UAE corporate tax system follows a tiered approach:

• 0% for annual net profits up to AED 375,000

• 9% for profits exceeding AED 375,000

• 15% for large multinationals with global revenues over EUR 750 million (aligned with OECD BEPS Pillar Two)

How to Register for Corporate Tax

Businesses must register with the Federal Tax Authority (FTA) via its official portal. Required documents include:

• Emirates ID

• Trade license

• Passport

• Financial statements

• Business activity details

• Corporate structure

Upon approval, companies receive a Tax Registration Number (TRN). Approval typically takes up to 20 working days.

Exempt Entities

The UAE Ministry of Finance (MOF) exempts specific organizations from corporate tax, including:

• Government bodies (federal and local)

• Businesses involved in natural resource extraction

• Approved charitable organizations

• Public and private pension or social security funds

• Investment funds meeting MOF and FTA criteria

• Government-owned UAE companies granted exemption by ministerial decision

Exempt Income

Some income streams may be exempt, including:

• Dividends or profit distributions from UAE or foreign entities

• Capital gains from share disposals

• Foreign exchange gains or losses

• Income from international shipping or aircraft leasing

• Profits of foreign branches (if exemption is elected)

Note: To qualify for dividend exemptions, the UAE business must typically own at least 5% of the subsidiary.

Corporate Tax for Free Zone Businesses

Entities based in UAE Free Zones may benefit from a 0% corporate tax rate, provided they qualify as a Qualifying Free Zone Person (QFZP) by:

• Earning Qualifying Income (as defined in Ministerial Decision No. 139 of 2023)

• Maintaining economic substance in the Free Zone

• Not electing for standard CT rates

• Meeting transfer pricing rules

Non-qualifying income must not exceed 5% of total revenue or AED 5 million, whichever is lower.

Corporate Tax for Freelancers

Freelancers without a formal company structure become subject to corporate tax once their annual revenue exceeds AED 1 million.

To operate legally in the UAE, freelancers must obtain a freelance or professional license from a relevant authority.

Corporate Tax for Group Companies

Groups of UAE-resident companies can form a Tax Group if they:

• Share the same financial year and accounting standards

• Are at least 95% owned by a common parent (directly or indirectly)

• Exclude any exempt or Free Zone entities

The Tax Group is treated as a single entity, and internal transactions are eliminated for tax purposes.

Tax Deductions and Allowable Expenses

Businesses can deduct legitimate expenses related to generating taxable income, such as:

• Donations to approved charities (Cabinet Decision No. 37 of 2023)

• Interest expenses (subject to a threshold of AED 12 million or 30% of EBITDA)

• Royalty payments to foreign affiliates (must be at arm’s length)

• Irrecoverable VAT

• Reasonable director and shareholder remuneration (market-rate only)

• Depreciation/amortisation of long-term assets

• Employee entertainment (50% deductible)

• Doubtful debts (IFRS-compliant)

• Government and business licensing fees

Foreign Branches and Foreign Tax Credits

UAE-based businesses with foreign branches can:

1. Claim a foreign tax credit (capped at the UAE tax due on that income), or

2. Elect for full exemption of income from qualifying foreign branches.

Administration and Filing Requirements

Corporate tax is managed by the Federal Tax Authority (FTA). Businesses must:

• Register with the FTA

• Maintain proper financial records

• File tax returns once a year, within 9 months after their financial year ends

For example:

• Financial year ends May 31 → Tax due by February 28

• Financial year ends December 31 → Tax due by September 30

Regional Comparison: Corporate Tax Rates

The UAE’s 9% rate remains highly competitive:

• Saudi Arabia: 20%

• Oman: 15%

• Qatar: 10%

• Kuwait: 15%

• Bahrain: Up to 46% (specific sectors)

Global comparisons:

• Ireland / Gibraltar / Liechtenstein: 12.5%

• Hong Kong: 7.5%–16.5%

• Singapore / San Marino: 17%

• Montenegro: 9%

Final Thoughts

The UAE’s corporate tax regime is designed to be competitive, fair, and globally aligned. Staying compliant requires timely registration, accurate reporting, and awareness of exemptions or deductions that may apply.

For tailored assistance, Mavericksvcs can help you navigate the UAE’s corporate tax framework, register with the FTA, and optimize your structure for tax efficiency.