The introduction of corporate tax in the UAE has marked a significant shift in the country’s tax landscape. With the UAE striving to align with global tax practices while maintaining its business-friendly environment, it is crucial for companies to understand their tax obligations.
To make things easier, we’ve put together this list of UAE Corporate Tax FAQs to answer common questions about corporate tax rates in UAE, exemptions, filing requirements, and more. This will help you understand what corporate tax means for your business and how to stay compliant with the regulations.
Here are some of the UAE Corporate Tax FAQs
1. Is There a Corporate Tax in the UAE?
Yes, the UAE introduced corporate tax starting from June 1, 2023. It applies to most businesses operating in the country, except for those that qualify for exemptions, such as certain government entities, some free zone businesses, and businesses involved in natural resource extraction (which remain subject to existing emirate-level taxation).
2. What is a Corporate Tax?
Corporate tax is a direct tax imposed on the net profits of businesses operating in the UAE. It was introduced to align the country with global tax standards while maintaining its competitive business environment.
3. What is the Corporate Tax Rate in the UAE?
The UAE corporate tax rates are:
- 0% for taxable income up to AED 375,000 (to support small businesses).
- 9% for taxable income exceeding AED 375,000.
- A different rate may apply to multinational companies meeting specific global tax criteria under OECD rules.
4. How is Corporate Tax Calculated?
UAE Corporate tax is calculated based on a company’s taxable income, which is determined after allowable deductions and exemptions.
Taxable Income Definition: The net profit of a business, as reported in its financial statements, after adjusting for non-taxable income and deductible expenses.
Allowable Deductions: Expenses related to business operations, such as rent, salaries, and marketing costs, can be deducted from taxable income.
Tax Computation Method:
- Determine total revenue.
- Subtract allowable business expenses.
- Apply exemptions, if any.
- If taxable income exceeds AED 375,000, apply the 9% tax rate.
5. Are Free Zone Companies Subject to Corporate Tax?
Free zone companies can enjoy tax benefits under specific conditions:
Free zone entities and qualifying income:
Free zone businesses can benefit from a 0% corporate tax rate on qualifying income if they meet the conditions set by the UAE Corporate Tax Law.
Conditions to maintain tax benefits:
- The company must operate within a recognized free zone.
- It must not conduct business with the UAE mainland (except under specific conditions).
- It should comply with transfer pricing rules and maintain proper financial records.
If a free zone company does business with the mainland or does not meet the qualifying criteria, it may be subject to the standard 9% corporate tax rate.
6. How Does Corporate Tax Affect Foreign Companies in the UAE?
Foreign companies may be subject to UAE corporate tax if they have a permanent establishment (PE) in the UAE. This includes situations where:
- The company has a physical presence, such as an office or branch.
- It generates income from business activities conducted in the UAE.
- It has dependent agents conducting business on its behalf in the UAE.
If a foreign company does not have a permanent establishment, it generally does not need to pay corporate tax in the UAE. However, each case depends on the company’s business structure and operations.
7. What are the Key Exemptions and Reliefs?
The UAE Corporate Tax Law provides specific exemptions and reliefs to support various sectors and encourage economic growth:
Small Business Relief
Businesses with revenues not exceeding AED 3 million in the relevant tax period can elect to be treated as not having derived any taxable income, thereby benefiting from a 0% corporate tax rate. This relief is available until 31 December 2026.
Exempt Entities
Certain entities are exempt from corporate tax, including:
- Federal and Emirate governments and their departments.
- Entities wholly owned and controlled by government bodies.
- Businesses engaged in the extraction of natural resources, subject to existing Emirate-level taxation.
- Organizations established for religious, charitable, scientific, artistic, cultural, or sporting purposes that meet specific criteria.
- Investment funds meeting certain conditions.
8. What is a Corporate Tax Period?
A Corporate Tax Period refers to the financial period for which a business calculates and reports its taxable income.
In the UAE, the standard corporate tax period aligns with the Gregorian calendar year, running from January 1 to December 31. However, businesses can apply for a different tax period, subject to approval by the Federal Tax Authority.
9. Can Companies Offset Losses Against UAE Corporate Tax?
Yes, companies in the UAE can offset their taxable income with previous losses, subject to specific rules:
- Tax losses can be carried forward indefinitely to offset future taxable income. However, the amount that can be utilized in a given tax period is limited to 75% of that period’s taxable income.
- The UAE Corporate Tax Law does not permit carrying back losses to previous tax periods.
- Losses incurred before the introduction of corporate tax (i.e., before June 1, 2023) or before a business becomes a taxable person cannot be carried forward. Additionally, if there’s a change in ownership of more than 50%, losses may not be carried forward unless the new owners continue the same business activities.
10. What are Transfer Pricing Rules in UAE Corporate Tax?
Transfer pricing rules ensure transactions between related parties are conducted at arm’s length (fair market value) to prevent profit shifting. Businesses must:
- Follow the Arm’s Length Principle – Transactions must reflect fair market value.
- Maintain Documentation – Keep records like Master and Local Files.
- Disclose Related-Party Transactions – Report them in tax returns for transparency.
11. Is it Possible for Businesses in the UAE to Claim Tax Treaty Benefits?
Yes, UAE businesses can benefit from Double Taxation Avoidance Agreements (DTAAs), which prevent double taxation. To qualify, they must:
- Obtain a Tax Residency Certificate from the UAE Federal Tax Authority.
- Meet economic substance requirements to prove genuine operations in the UAE.
12. What are the Penalties for Non-Compliance?
Failing to comply with UAE corporate tax regulations can lead to fines, including:
- AED 10,000+ for not maintaining proper records.
- Late filing penalties for delayed tax returns.
- Hefty fines for incorrect tax filings or underreporting income.
13. What Supporting Documents are Required for Corporate Tax Filing in the UAE?
For corporate tax filing in the UAE, businesses must submit:
- Financial Statements (audited if applicable)
- Tax Registration Number (TRN)
- Invoices & Contracts (for revenue and expenses)
- Transfer Pricing Documentation (if applicable)
- Bank Statements & Payroll Records
- Previous Tax Returns (if applicable)
14. How Can Businesses Prepare for UAE Corporate Tax?
To comply with UAE corporate tax regulations, businesses should:
- Obtain a Tax Registration Number (TRN) from the FTA.
- Keep organized books of accounts, invoices, and tax-related documents.
- Identify allowable deductions, exemptions, and reliefs to optimize tax liability.
- Ensure related-party transactions follow arm’s length pricing and maintain proper documentation.
- Keep track of tax law changes and deadlines to avoid penalties.
- Consult experts for tax planning, compliance, and audit support.
How Can Shuraa Tax Help with UAE Corporate Tax Compliance?
Shuraa Tax offers expert corporate tax services, including:
Corporate Tax Registration & Filing
Helping businesses register for corporate tax and submit timely returns.
Tax Planning & Advisory
Providing strategies to optimize tax savings while ensuring compliance.
Audit & Compliance Support
Assisting with financial audits, record-keeping, and meeting FTA requirements.
Transfer Pricing & VAT Compliance
Ensuring businesses follow proper tax policies for related-party transactions and VAT obligations.
Penalty Mitigation & Legal Support
Helping businesses resolve tax disputes, avoid penalties, and maintain compliance.
With Shuraa Tax, businesses can stay compliant and stress-free.
Contact us today at +(971) 44081900 or WhatsApp us at +(971) 508912062 for expert tax solutions.
