UAE Corporate Tax: What Every Business Should Know

Since June 2023, UAE Corporate Tax has moved from a talking point to a real compliance obligation for most businesses operating in the country. Whether you’re running a mainland trading company, a free zone entity, or a small professional practice, understanding how the tax works — and where it applies to you — is now part of running a business in the UAE.

Here’s a general overview of how UAE Corporate Tax is structured.

What Is UAE Corporate Tax?

UAE Corporate Tax (CT) is a federal tax on the net profit of businesses, introduced by Federal Decree-Law No. 47 of 2022. It applies to financial years starting on or after 1 June 2023, and is administered by the Federal Tax Authority (FTA) — the same body responsible for VAT.

Who Does It Apply To?

Corporate Tax applies broadly to:

• UAE mainland companies
• Free zone entities (with special rules — see below)
• Branches of foreign companies operating in the UAE
• Individuals conducting business activity under a commercial licence

Certain entities are exempt or fall outside scope, including government entities, extractive businesses (subject to separate Emirate-level taxation), and qualifying public benefit organisations.

Rates and Thresholds

The headline structure is straightforward:

• 0% on taxable income up to AED 375,000
• 9% on taxable income above AED 375,000

Free zone entities that meet the conditions to be a “Qualifying Free Zone Person” can continue to benefit from a 0% rate on qualifying income, while non-qualifying income is taxed at the standard 9% rate. Determining what counts as “qualifying income” is one of the more detailed areas of the law and depends on the nature of the free zone entity’s activities and counterparties.

Registration and Filing

All businesses within scope are required to register for Corporate Tax with the FTA and obtain a Tax Registration Number, regardless of whether they ultimately owe any tax. Corporate Tax returns are filed annually, within nine months of the end of the relevant financial year — the same window in which any tax due must be paid.

Areas That Often Cause Confusion

A few aspects of the regime tend to trip businesses up:

• Related party transactions. Transactions between related parties and connected persons must be priced on an arm’s length basis and, depending on size, may require formal transfer pricing documentation.
• Free zone qualifying income. Not all free zone income automatically qualifies for the 0% rate — the source and nature of the income matter.
• Small Business Relief. Resident businesses with revenue below a specified threshold may elect to be treated as having no taxable income for a given period, but this comes with its own conditions and trade-offs.

Staying on Top of It

UAE Corporate Tax is still a relatively young regime, and FTA guidance continues to evolve as more businesses go through their first filing cycles. Keeping accurate, well-organised financial records throughout the year — rather than reconstructing them at filing time — is the single biggest factor in a smooth Corporate Tax season.

This article is a general overview and isn’t exhaustive — every business’s position depends on its specific structure, activities, and jurisdiction within the UAE.

This article is provided for general informational purposes only and does not constitute professional accounting, tax, financial, or legal advice. Royal Grace is not liable for any action taken based on this content. Read our full disclaimer.