Corporate Tax is a tax on your business’s actual profit. After covering all your usual expenses, like staff, rent, supplies, and utilities, what’s left is your profit. That is the part subject to tax in the UAE.
Almost every business needs to know about this, though there are a few exceptions, which we will cover soon.
It’s common to mix up Corporate Tax and VAT, but they work very differently.
Corporate Tax is charged on your company’s profit at the end of the financial year, after you subtract expenses.
VAT, or Value Added Tax, is a tax applied to most goods and services that your business sells or buys.
VAT is charged on each transaction, while Corporate Tax is based on your overall business results. Most businesses in the UAE need to handle both taxes, but the calculations and reporting are separate.
Here is a date to remember, June 1, 2023. From that day on, any profit your business earns could be covered by the UAE’s Corporate Tax rules. If you are operating here, keep this in mind for your next return.
You will be covered by these rules if you:
If you are freelancing and your income is below a certain amount, you might be outside the scope, but it all depends on how much you make and how you are set up.
The tax rates are straightforward:
Let us say your business shows a taxable profit of AED 500,000. The first AED 375,000, no tax. The next AED 125,000, that is where the nine percent applies.
The tax rates are straightforward:
Let us say your business shows a taxable profit of AED 500,000. The first AED 375,000, no tax. The next AED 125,000, that is where the nine percent applies.
Yes, a few businesses do not pay Corporate Tax. These include some government entities, certain investment funds, and companies involved in extracting natural resources, which follow different tax rules. If you run a free zone company, you could still get the zero percent rate, but only if you stick to certain requirements.
Free zone companies can keep their zero percent rate by meeting a few rules:
If something changes, for example, you start trading with the mainland, be prepared for the nine percent tax rate to apply.
As of January 2025, the UAE introduced the Domestic Minimum Top-Up Tax. This tax applies to large multinational groups with global revenues of at least €750 million (around AED 2.99 billion). If a group’s effective tax rate in the UAE falls below 15 percent, DMTT will “top up” the tax so it reaches this minimum. The aim is to align with global tax standards and prevent other countries from taxing UAE-earned profits. If your business is part of a multinational group, check your effective tax rate and compliance requirements.
The UAE offers targeted exemptions for certain types of businesses:
If you are a freelancer, sole proprietor, or individual earning over AED 1 million from business activities, you are required to register for corporate tax. Registration deadlines and penalties may change, so always check the latest requirements.
Your tax period will usually be twelve months, matching your company’s financial year. For example, if you start on January 1 and close your books on December 31, that is your tax period. After your year wraps up, you get ready to file.
Once your tax year ends, you have nine months to handle everything. Submit your return and pay any tax you owe. For example, if your tax year ends December 31, 2024, you need to sort it all out by September 30, 2025.
Had a tough year? It happens. The good news is, you can carry those losses forward. Use them to reduce your taxable income the next time you are profitable. It is one way the system helps you manage ups and downs.
Yes, even if your profit is below AED 375,000, or you are eligible for the zero percent rate, you must still register and submit a return to the FTA. Filing your return is part of your business responsibilities in the UAE. Even if there is no tax due, completing your tax return shows you are following the rules and helps you avoid fines down the line.
The FTA can apply penalties if you miss a step. That could mean a set fine for missing registration, daily penalties if you are late submitting, or extra charges if tax is unpaid. Staying organized and meeting deadlines saves you hassle and money.
The Federal Tax Authority (FTA) sometimes offers initiatives to waive the administrative penalty for late submission of corporate tax registration. To benefit, you usually must submit your tax return (or annual declaration if exempt) within seven months from the end of your first tax period. If you missed your registration deadline or were fined but have not yet paid, check if a waiver is currently available and act fast to avoid extra costs. If you already paid and later qualify for a waiver, the penalty may be refunded to your tax account.
The UAE offers strategic tax incentives to encourage growth and innovation:
If your business is in a qualifying field or invests in innovation, these incentives can help lower your effective tax rate.
Here is a quick plan:
Yes. VAT and Corporate Tax are separate. Even if you already have a VAT Tax Registration Number (TRN), you must apply again for a Corporate Tax TRN.
Resident persons include UAE-incorporated companies, legal entities, and foreign companies that are effectively managed and controlled in the UAE.
They are taxed on worldwide income (unless exemptions apply). Non-resident persons are companies that do not have a permanent establishment in the UAE but earn UAE-sourced income. They may still be subject to tax on that UAE income.
Foreign companies are only subject to Corporate Tax if they have a permanent establishment in the UAE (like an office, branch, or fixed place of business).
Yes, but with relief. UAE companies are taxed on worldwide income, but they may claim a foreign tax credit for taxes already paid abroad to avoid double taxation.
The UAE has introduced a Small Business Relief scheme that allows eligible businesses with revenue under a certain threshold to be treated as if they have no taxable income. This reduces compliance costs and supports entrepreneurs.
Yes, if they operate under a commercial license and their net profit exceeds the tax-free threshold. Freelancers without a license are generally not subject to corporate tax, but obtaining one might make them taxable.
Businesses must maintain:
Records must generally be kept for at least 7 years for FTA review or audit purposes.
Yes — some expenses don’t count for tax purposes. For example, fines and penalties are never deductible. Entertainment costs? Only 50% of those can be deducted. The rule of thumb: if it’s not directly for business, it probably won’t count.
Businesses engaged in cross-border dealings with related parties must comply with transfer pricing rules, ensuring transactions are at “arm’s length.” The FTA may require supporting documentation such as transfer pricing policies or master/local files for larger groups.
Yes. You can lower your taxable income by claiming deductible expenses (like salaries, rent, and utilities). You can also use loss relief — carrying forward business losses to offset future profits.
A Tax Group lets two or more UAE-resident companies register as one taxable unit for Corporate Tax. Instead of filing separate returns, the whole group files a single return under the parent company’s TRN.
All group members’ financial results are consolidated, ignoring transactions between group companies (so no double-counting). The group then calculates Corporate Tax on the combined taxable income.
Not every business needs an audit by law. But free zones, banks, and investors may ask for one. Having audited accounts also makes your tax filing more reliable.
Yes, you can file directly through the FTA’s EmaraTax portal. But if your business is more complex, many owners choose to hire a tax advisor for peace of mind.
You’ll need to deregister with the FTA. Before that, you’ll file one last corporate tax return and pay anything outstanding. Once that’s cleared, your corporate tax obligations officially end.
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