For years, the United Arab Emirates has been a magnet for international enterprises, renowned for its business-friendly environment and dynamic economy. In a move toward global tax alignment, the UAE Corporate Tax regime was formally introduced in June 2023, representing a pivotal development in the nation's fiscal policy.

This detailed overview will help you grasp the essentials of UAE corporate tax, including applicable rates, the registration procedure, and compliance requirements under the federal corporate tax law.

Understanding Corporate Tax in the UAE

Corporate tax is a direct tax imposed on the net profit of businesses operating within the UAE. Administered by the Federal Tax Authority (FTA), this tax is applicable across all seven emirates.

Established by Federal Decree-Law No. 47 of 2022, the corporate tax framework applies to both locally established and foreign entities generating income in the UAE.

Corporate Tax Rates in the UAE

Taxable Income Bracket	Applicable Tax Rate
Up to AED 375,000	0% (Small Business Relief)
Above AED 375,000	9%
Certain industries (e.g., foreign banking, hydrocarbon sector)	Up to 20% (sector-specific)

Special rules apply to Multinational Enterprises (MNEs) under OECD BEPS 2.0 standards, particularly those with consolidated global revenues surpassing AED 3.15 billion.

Who Is Subject to Corporate Tax?

• Resident Entities: Companies established in the UAE, foreign entities managed from within the UAE, and individuals generating annual business income exceeding AED 1 million.
• Non-Resident Entities: Foreign companies with a permanent establishment in the UAE or deriving UAE-sourced income.

Corporate Tax Registration in the UAE

All taxable persons are required to complete corporate tax registration with the FTA and secure a Corporate Tax Registration Number. This encompasses:

• Mainland registered companies
• Free zone entities
• Foreign company branches
• Individual proprietors with qualifying turnover

Deadline: Registration must be completed prior to the submission of the first corporate tax return.

How Corporate Tax Is Calculated

The process for calculating corporate tax liability is structured as follows:

1. Calculate Total Revenue
2. Subtract Permissible Deductions, such as:
   • Staff remuneration
   • Lease payments
   • Operational overheads
   • Advertising expenditure
   • Financing costs
   • Asset depreciation
3. Determine Taxable Profit
4. Apply the Relevant Tax Rate (0% or 9%)

Businesses are required to maintain precise financial records in accordance with UAE GAAP or IFRS standards.

Corporate Tax Treatment in Free Zones

Eligible Free Zone entities can benefit from a 0% corporate tax rate provided they satisfy these conditions:

• Attain Qualifying Free Zone Person (QFZP) status
• Derive Qualifying Income from approved activities within the zone
• Do not engage in Excluded Activities or maintain a permanent establishment outside the Free Zone

Important: Free Zone businesses must still complete registration and file tax returns, even if exempt from tax payment.

Salient Features of the UAE Corporate Tax System

• Standard 9% rate on profits exceeding AED 375,000
• 0% rate for eligible small businesses and qualifying Free Zone entities
• Tax year based on financial year – entities with fiscal years beginning after June 1, 2023, fall under the regime
• Allowance for deductible business expenditures
• Alignment with international accounting standards (IFRS)
• Fines for late filing or non-payment of tax dues

How KVGC Can Support Your Business

Adapting to the UAE's corporate tax system demands expertise, accuracy, and ongoing compliance. KVGC offers end-to-end professional assistance in:

• Corporate tax registration in the UAE
• Preparation and filing of tax returns
• VAT registration and compliance
• Financial auditing and assurance
• Strategic tax planning and advisory

Rely on KVGC's corporate tax specialists to ensure your business remains compliant, optimized, and poised for growth in 2025 and beyond.