UAE Corporate Tax

The UAE Corporate Tax (CT) rates differ based on the category of the taxpayer. Individuals and juridical persons are subject to a 0% corporate tax on taxable income up to AED 375,000, while taxable income exceeding this threshold is taxed at 9%. Qualifying Free Zone Persons benefit from a 0% corporate tax rate on qualifying income, whereas income that does not meet the qualifying criteria is taxed at 9%.

The UAE Corporate Tax law applies to financial periods beginning on or after 1 June 2023 and covers both resident and non-resident taxable persons. Resident taxable persons include legal entities incorporated or established in the UAE, individuals carrying out business or professional activities within the UAE, and foreign entities that are effectively managed and controlled in the UAE. Non-resident taxable persons include those with a permanent establishment in the UAE, those earning UAE-sourced income, or those having a sufficient nexus with the UAE.

Resident taxable persons are subject to corporate tax on their worldwide income, while non-resident taxable persons are taxed only on income attributable to their UAE permanent establishment or on UAE-sourced income that is not connected to a permanent establishment. Certain entities and activities are exempt from UAE Corporate Tax, including UAE government entities, specific government-owned companies, businesses involved in the extraction of natural resources in the UAE, and investment funds that meet prescribed conditions. Understanding the treatment and utilisation of tax losses is essential, and expert support from Taxoryx can help businesses maximise available relief while remaining compliant.

The Corporate Tax regime also applies to companies and branches operating in UAE free zones. Qualifying Free Zone Persons may continue to enjoy a 0% corporate tax rate on qualifying income, provided they meet the required conditions. Any taxable income that falls outside the definition of qualifying income will be subject to corporate tax at 9%. To retain Qualifying Free Zone Person status, entities must maintain adequate economic substance in the UAE, derive qualifying income, refrain from electing into the standard corporate tax regime, and comply with transfer pricing rules and documentation requirements.

Taxable income is determined by adjusting the net profit or loss shown in standalone financial statements. This calculation considers exempt income and allowable deductions, including dividends and profit distributions received from domestic or foreign companies and capital gains arising from qualifying participating interests. Certain expenses are treated as non-deductible, such as fines, penalties, and other expenditures not incurred wholly and exclusively for business purposes.

Tax losses may be carried forward and offset against taxable income in future financial periods, subject to specific conditions and limitations. The UAE Corporate Tax framework also allows for the transfer of losses and group relief in qualifying situations, enabling businesses to improve tax efficiency through effective structuring.

The Corporate Tax regime includes transfer pricing regulations that apply to transactions between related parties and connected persons. These rules follow the arm’s length principle in line with the OECD Transfer Pricing Guidelines and require businesses to ensure that intercompany transactions are conducted on market terms.

Related parties include individuals connected through kinship or affiliation up to the fourth degree, individuals who own or control at least 50% of a legal entity, and legal entities connected through common ownership or control. Connected persons are also subject to transfer pricing considerations under the UAE Corporate Tax law.

Taxable persons must maintain appropriate transfer pricing documentation, including a local file detailing material related-party transactions and a master file containing high-level information about multinational groups. In addition, the General Anti-Abuse Rule (GAAR) allows the tax authorities to counteract arrangements that lack valid commercial substance or are primarily intended to obtain a corporate tax advantage.

When calculating UAE Corporate Tax, it is important to consider all applicable rules, exemptions, and compliance requirements. Taxoryx provides expert guidance to help businesses navigate corporate tax obligations, understand applicable tax rates, identify exemptions, and ensure full compliance with UAE Corporate Tax regulations while optimising overall tax efficiency.

Income that may be exempt from UAE Corporate Tax includes UAE Federal and Emirate Government entities and their departments, agencies, authorities, and public institutions, government-owned companies that are wholly owned and controlled and listed in a Cabinet Decision, businesses engaged in the extraction of UAE natural resources and related non-extractive activities, public benefit entities approved by Cabinet Decision, qualifying investment funds, public or private pension and social security funds meeting prescribed conditions, and UAE juridical persons wholly owned and controlled by certain exempt entities subject to specific requirements.

Businesses can benefit from available exemptions and strategic tax planning with the support of Taxoryx. Our specialists assist in assessing eligibility, meeting compliance conditions, and maximising tax advantages under the UAE Corporate Tax framework. Reach out to Taxoryx today to ensure your business remains compliant and tax-efficient.