Direct Tax
The UAE has introduced a Corporate Tax regime under Federal Decree-Law No. 47 of 2022, applicable to financial years beginning on or after 1 June 2023. Corporate Tax is a direct tax on the net profits of businesses, marking a significant change in the UAE’s tax landscape while preserving its position as a competitive global business hub.
Corporate Tax generally applies to:
- Companies and other juridical persons incorporated in the UAE, including mainland and Free Zone entities
- Foreign entities with a permanent establishment or taxable presence in the UAE
- Individuals conducting business activities in the UAE, subject to certain exemptions
The standard Corporate Tax rates are:
- 0% on taxable income up to AED 375,000, and
- 9% on taxable income exceeding AED 375,000
Free Zone companies are also within the scope of Corporate Tax. However, entities that meet the conditions to qualify as a Qualifying Free Zone Person may benefit from 0% tax rate on qualifying income, provided all prescribed conditions are satisfied.
The Corporate Tax law also provides reliefs and exemptions for certain categories of entities, including government entities, qualifying public benefit entities, qualifying investment funds, and eligible small businesses, subject to specific conditions.
Corporate Tax is assessed on a self-assessment basis, placing greater responsibility on businesses to ensure accurate calculation, reporting, and timely compliance.
Why this matters for businesses
The introduction of Corporate Tax represents a new compliance and planning responsibility for businesses operating in the UAE. Understanding how the rules apply, identifying available reliefs, and aligning tax positions with business operations are now critical to managing risk and avoiding penalties.