Corporate Tax
The UAE has traditionally been known as a tax-free jurisdiction, making the country a haven for foreign investors and entrepreneurs. That changed after the introduction of Excise Tax and Value Added Tax (VAT). However, these two taxes are not direct taxes and the introduction of corporate tax in the UAE changed the country’s tax landscape.
Corporate Tax Rates in the UAE
The UAE corporate tax rate is 9% for companies earning a taxable income exceeding AED 375,000. The tax rate is 0% for companies generating a taxable income up to and including AED 375,000.
Corporate Tax Rate for Free Zone Persons
A Qualifying Free Zone Person can enjoy a 0% corporate tax rate on its Qualifying Income. The tax rate will be 9% on Taxable Income that is not Qualifying Income as specified in Cabinet Decision No. 55 of 2023.
Corporate Tax Registration
All companies incorporated in the UAE including mainland, free zone and offshore entities must register for corporate tax. The timeframe for submitting the application for corporate tax registration in the UAE is based on the license-issuing month and date. Companies must apply for corporate tax registration to avoid hefty penalties.
Small Business Relief under Corporate Tax
Entities with Revenues of AED 3 million or below in a relevant Tax Period and previous Tax Periods can apply for ‘Small Business Relief’ for Tax Periods that end on or before 31 December 2026. Once they elect for the relief the small businesses will be treated as having no Taxable Income during the relevant Tax Period and they can benefit from simplified compliance obligations.
Corporate Tax Grouping in the UAE
Companies in the UAE can apply to form a tax group to be treated as a single Taxable Person. However, a tax group can be formed only if the UAE parent company (directly or indirectly) holds at least 95% of the share capital and voting rights of each of the companies, and meets all other relevant conditions.
