Introduction to Corporate Tax in the UAE

The UAE introduced Corporate Tax (CT) effective June 1, 2023, as part of its commitment to global tax standards. The tax applies to business profits and is administered by the Federal Tax Authority (FTA). Corporate tax aims to enhance the UAE’s economic growth while ensuring a fair tax system.

This guide will help UAE businesses understand corporate tax rates, exemptions, compliance requirements, and penalties.

1. Corporate Tax Rates in the UAE

The corporate tax structure in the UAE is designed to support startups and SMEs while ensuring tax contributions from larger enterprises.

Tax Rates for Businesses:

Business Category	Tax Rate
Annual taxable income up to AED 375,000	0% (Exempt)
Annual taxable income above AED 375,000	9%
Qualifying Free Zone Companies	0% or 9% (Based on Activity)
Multinational Enterprises (MNEs) meeting OECD Pillar Two criteria	15% (Global Minimum Tax Rate)

✅ Individuals are not subject to corporate tax unless conducting business under a commercial license.
✅ Freelancers earning above AED 375,000 annually may be subject to corporate tax.

2. Who is Subject to Corporate Tax?

Corporate tax applies to:

✔️ UAE-incorporated companies
✔️ Foreign companies with a permanent establishment in the UAE
✔️ Individuals engaged in business under a commercial license
✔️ Free zone entities conducting business with the mainland (if non-qualifying)

3. Exemptions from Corporate Tax

Certain businesses and entities are exempt from UAE corporate tax, including:

✅ Government entities and their wholly-owned subsidiaries
✅ Public benefit organizations (charities, non-profits)
✅ Qualifying Free Zone Businesses that meet economic substance requirements
✅ Businesses engaged in natural resource extraction (subject to Emirate-level taxation)
✅ Investment funds and pension funds (if they meet qualifying conditions)

4. Corporate Tax Compliance Requirements

Registered businesses must comply with the following FTA corporate tax obligations:

🔹 Corporate Tax Registration – Businesses must register with the FTA and obtain a Tax Registration Number (TRN).
🔹 Taxable Income Calculation – Corporate tax is applied to the net profit reported in audited financial statements, with certain adjustments.
🔹 Annual Corporate Tax Return Filing – Companies must file tax returns and pay corporate tax within nine months after the end of the financial year.
🔹 Record-Keeping – Businesses must maintain financial records and supporting documents for at least 7 years for tax audits.

5. Corporate Tax on Free Zone Companies

Free zone businesses can benefit from a 0% corporate tax rate if they meet the Qualifying Free Zone Person (QFZP) criteria, which includes:

✔️ Maintaining adequate economic substance in the UAE
✔️ Earning qualifying income from permitted activities
✔️ Not conducting business with the mainland

If a free zone company earns non-qualifying income, a 9% corporate tax will apply.

6. Deductible & Non-Deductible Expenses for Corporate Tax

Businesses can reduce their taxable income by deducting allowable expenses, while certain costs are non-deductible.

✅ Deductible Expenses:

Employee salaries and benefits
Rent, utilities, and office expenses
Advertising and marketing costs
Depreciation of assets

❌ Non-Deductible Expenses:

Personal expenses
Penalties and fines
Bribes or illegal payments

7. Corporate Tax Penalties in the UAE

Non-compliance with corporate tax laws can result in FTA-imposed penalties.

Violation	Penalty
Failure to register for corporate tax	AED 10,000
Late corporate tax return filing	AED 1,000 (first offense), AED 2,000 (repeat offense)
Failure to maintain records	AED 10,000 – AED 50,000
Late corporate tax payment	14% per annum on unpaid tax

8. How Accuvat Chartered Accountants Can Help

Corporate tax compliance requires expertise to ensure businesses optimize tax liabilities and avoid penalties. At Accuvat Chartered Accountants, we provide:

✔️ Corporate Tax Registration & Advisory
✔️ Corporate Tax Return Filing & Compliance
✔️ Tax Planning & Optimization
✔️ FTA Audit Assistance