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Ultimate Guide to Corporate Tax in the UAE
The United Arab Emirates introduced Corporate Tax (CT) on business profits effective 1 June 2023, marking a significant milestone in the country’s economic evolution.
The tax is governed by Federal Decree–Law No. 47 of 2022 on the Taxation of Corporations and Businesses and administered by the Federal Tax Authority (FTA).
Corporate Tax applies to most UAE businesses and is designed to support the nation’s diversification goals, align with international tax standards, and maintain the UAE’s reputation as a transparent, competitive hub for investment.
Key Facts:
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Tax Authority: Federal Tax Authority (FTA)
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Tax Rate: 0% on taxable income up to AED 375,000; 9% above AED 375,000
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Effective Date: Financial years starting on or after 1 June 2023
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System Used: EmaraTax Portal
Who Is Subject to Corporate Tax
Corporate Tax applies to both juridical persons (companies and entities with legal personality) and natural persons (individuals engaged in business activities in the UAE).
✅ Juridical Persons (Legal Entities)
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Mainland LLCs, PSCs, PJSCs, LLPs
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Free Zone companies (subject to qualifying income rules)
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Foreign legal entities with a Permanent Establishment (PE) or UAE-source income
✅ Natural Persons (Individuals)
Individuals are subject to CT only if they are engaged in business or commercial activities that require a business licence (e.g. freelancers, sole proprietors, or consultants).
❌ Exempt Persons
Certain entities are fully exempt from Corporate Tax, including:
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Government entities
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Government-controlled entities listed under Cabinet Decision
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Extractive and non-extractive natural resource businesses
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Public benefit entities (upon approval)
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Qualifying investment funds
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Pension or social security funds
Corporate Tax Rates and Thresholds
| Taxable Income (AED) | Corporate Tax Rate |
|---|---|
| 0 – 375,000 | 0% |
| Above 375,000 | 9% |
| Multinational Groups with global revenue over EUR 750 million | 15% (Pillar Two / OECD Global Minimum Tax) |
The AED 375,000 threshold is designed to support small businesses and start-ups by exempting lower profits from taxation.
Determining Tax Residency
Resident Persons
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UAE-incorporated companies and entities
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Foreign companies managed and controlled in the UAE (Place of Effective Management – POEM)
Non-Resident Persons
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Entities not based in the UAE but with UAE-sourced income, or
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Entities operating through a Permanent Establishment (PE) in the UAE
Corporate Tax Registration in the UAE
Every business within the scope of the law must register for Corporate Tax and obtain a Tax Registration Number (TRN) through the EmaraTax portal.
Step-by-Step Registration Process
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Create an EmaraTax account here
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Prepare required documents:
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Trade licence
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Emirates IDs / passports of owners
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Memorandum of Association (MOA)
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Proof of business address and bank details
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Submit the registration form online
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Receive your TRN once approved
Registration Deadlines
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The FTA has specified staggered registration deadlines based on licence issuance dates.
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Penalties apply for late registration (AED 10,000).
Required Ongoing Compliance
After registration, businesses must:
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Maintain accurate accounting records
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File annual Corporate Tax returns
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Pay tax due within prescribed timelines
Qualifying Free Zone Person (QFZP)
Free Zone businesses can enjoy a 0% Corporate Tax rate on qualifying income if they meet specific criteria under Cabinet Decision No. 55 of 2023 and Ministerial Decision No. 139 of 2023.
QFZP Eligibility Criteria
To qualify, a Free Zone business must:
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Maintain adequate substance in the UAE
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Derive Qualifying Income (as defined by the FTA)
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Not elect to be subject to the standard 9% rate
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Comply with Transfer Pricing rules and maintain documentation
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Prepare audited financial statements
Qualifying Income Includes:
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Income from trading with other Free Zone entities
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Income from qualifying activities (manufacturing, distribution, logistics, etc.)
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Income from transactions with foreign customers
Non-Qualifying Income (e.g. mainland sales) is taxed at 9%.
Corporate Tax Reliefs and Exemptions
The Corporate Tax regime provides several reliefs designed to simplify compliance and reduce the tax burden for small and growing businesses.
Small Business Relief (Article 21)
Available to UAE businesses with revenue below AED 3 million in a tax period.
Such entities are treated as having no taxable income and pay 0% Corporate Tax.
Tax Loss Relief (Articles 37–38)
Businesses can carry forward tax losses indefinitely to offset future profits (subject to conditions).
Business Restructuring Relief (Article 27)
Applicable to qualifying reorganisations — transfers or mergers between related entities can be done tax-free if certain ownership conditions are met.
Foreign Permanent Establishment (PE) Exemption (Article 24)
UAE businesses with foreign branches can elect to exclude foreign income from UAE taxation, provided tax was paid abroad.
Filing, Payment, and Record-Keeping Requirements
Filing
Businesses must file one Corporate Tax return per financial year — no quarterly filings required.
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Deadline: Within 9 months of the end of the financial year
(e.g. 31 December year-end → filing due by 30 September next year)
Payment
Corporate Tax due must also be paid within the same 9-month deadline.
Record-Keeping
Businesses must retain financial records for at least 7 years, including:
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Financial statements
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Invoices and receipts
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Tax computations
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Transfer Pricing documentation
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Contracts and agreements
Common Errors and Risk Areas
| Error | Impact |
|---|---|
| Late or missed registration | AED 10,000 penalty |
| Failure to maintain proper records | AED 10,000–20,000 penalty |
| Misclassification of income (Qualifying vs Non-Qualifying) | Loss of 0% Free Zone status |
| Inaccurate expense deductions | Overstated profits and additional tax due |
| No Transfer Pricing documentation | Heavy penalties and profit adjustments |
Avoiding these pitfalls is critical — even minor errors can lead to retrospective tax assessments.
Transfer Pricing Compliance
Businesses engaging in related party transactions must ensure all dealings are conducted at arm’s length and properly documented.
Key Obligations:
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Maintain Transfer Pricing documentation (Local & Master File, if applicable)
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Submit Disclosure Form with the CT return
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Apply accepted pricing methods (Comparable, Cost Plus, etc.)
FTA may impose significant penalties for incomplete or missing documentation.
Penalties and GAAR (General Anti-Abuse Rule)
The FTA enforces strict penalties for non-compliance.
| Violation | Penalty (AED) |
|---|---|
| Late registration | 10,000 |
| Late filing | 500–1,000 escalating |
| Late payment | 14% annually (pro-rata) |
| Incomplete or inaccurate return | 500–5,000 |
| Failure to maintain records | 10,000–20,000 |
| GAAR violations | Disallowance of tax benefit, further penalties |
GAAR (Article 50) allows the FTA to disregard transactions structured solely to obtain a tax advantage.
Preparing for an FTA Corporate Tax Audit
Audits are expected to become more frequent from 2025 onwards.
How to prepare:
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Ensure books and records are complete and auditable
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Keep documented justifications for major deductions
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Maintain up-to-date Transfer Pricing files
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Reconcile accounting and tax figures each year
The FTA typically provides notice and may request documents within 5 business days of audit initiation.
What This Means for Your Business
Corporate Tax is now a permanent feature of doing business in the UAE — but with proactive planning and accurate financial systems, compliance can be straightforward.
To stay compliant:
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Register on time and file annually
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Maintain well-organised records and reconciliations
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Review transactions with Free Zones or related parties carefully
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Conduct an annual Corporate Tax review
At More Than Accountants, we help UAE businesses prepare, register, and stay compliant — ensuring every step from tax calculation to FTA reporting is handled seamlessly.
