Corporate Income Tax in the United Arab Emirates
The Corporate Income Tax is imposed on the profits of companies registered in the Emirates, including Mainland companies (at a rate of 9%) and Free-zone companies (at rates of 0% and 9%).
The regulation of this tax is governed by Federal Decree-Law No. 47 of 2022.
Scope of Application
Resident Individuals
The corporate tax applies to the following categories:
- Companies incorporated in the Emirates and other legal entities established or effectively managed and controlled in the Emirates.
- Individuals conducting commercial activities in the Emirates, in accordance with regulations.
Non-Resident Individuals
Foreign legal entities with a permanent establishment in the Emirates.
Companies established in Free-zones in the Emirates are also subject to corporate tax as ‘taxable persons.’ However, Free-zone companies may benefit from a 0% tax rate on their qualified income.
Individuals Exempt from Corporate Tax
Some types of businesses or organizations are exempt from corporate tax according to Article (4) of Federal Decree-Law No. 47 of 2022:
- Government entities.
- Entities controlled by the government.
- Non-extractive natural resource businesses.
- Qualified public interest entities.
- Public or private pension and social security funds.
- Qualified investment funds.
Effective Dates
According to Article 69, the UAE Corporate Tax regime will be effective for financial years commencing on or after June 1, 2023. In accordance with Article 48, taxpayers must file Corporate Tax returns and fulfill their obligations within 9 months following the end of the relevant tax period, starting from June 1, 2023.
Exempted Income (Article 22)
Certain incomes and associated expenses are not considered in determining taxable income. This includes dividends and profit distributions received from corporate entities established in or resident in the Emirates, as well as dividends received from a stake in a foreign corporate entity.
Corporate Tax Calculation and Deductions
The calculation of corporate tax is based on the net accounting profit. Companies use their financial accounting period as the tax period. Tax is levied on the company’s annual taxable income, with variable rates depending on the income amount.
Calculation of Corporate Tax and Deductions
The calculation of corporate tax is based on the net accounting profit. Companies use their financial accounting period as the tax period. Tax is levied on the company’s annual taxable income, with variable rates depending on the income amount.
Corporate Income Tax Exemption for SMEs
Companies with an annual turnover below AED 3,000,000 will benefit from a reduction in the Corporate Income Tax rate until 31/12/26, as per Ministerial Decision No. 73 of 2023 (the amount/rate of this reduction is yet to be specified).
