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Corporate Tax in the UAE has been a hot topic among entrepreneurs since its introduction. Despite the abundance of articles on the subject, many still find themselves uncertain about the details. This lack of clarity has led to unfortunate situations where businesses have faced significant penalties — a AED 10,000 fine is no small matter.
To address this issue, we've compiled a comprehensive guide that breaks down the essentials of UAE Corporate Tax in clear, straightforward terms. Our goal is to provide you with all the necessary information in one easily digestible article, helping you navigate this complex topic with confidence.
To address this issue, we've compiled a comprehensive guide that breaks down the essentials of UAE Corporate Tax in clear, straightforward terms. Our goal is to provide you with all the necessary information in one easily digestible article, helping you navigate this complex topic with confidence.
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We remember when the UAE was a "0% tax on everything" country. Why was Corporate Tax introduced?
Corporate Tax (CT) in the UAE is a direct tax levied on a company's taxable income, calculated by deducting all expenses from income or profit.
On December 9th, 2022, the Federal Tax Authority (FTA) introduced the CT law through Federal Decree Law No. 47/2022, which came into effect on June 1st, 2023.
This new tax regulation likely contributed to the UAE's successful removal from the "grey list" of countries under increased monitoring for money laundering. The UAE had been on this list since March 2022, with the Financial Action Task Force (FATF) expressing concerns about potential money laundering and terrorism financing through banks, precious metals and stones, and real estate sectors. This listing had negatively impacted the country's reputation, reduced investment, and created challenges for entrepreneurs conducting international business from the UAE.
Here are the actions taken by the UAE authorities:
These efforts paid off in 2024 when the UAE achieved its goal of being removed from the list. FATF president Raja Kumar acknowledged that the country had "taken substantial steps" to enhance its financial crime-fighting system. Bhavin Shah, a Dubai-based financial crime expert, noted that the UAE's removal from the list "restores the global business community's trust in the UAE to have a robust framework to fight financial crimes."
On December 9th, 2022, the Federal Tax Authority (FTA) introduced the CT law through Federal Decree Law No. 47/2022, which came into effect on June 1st, 2023.
This new tax regulation likely contributed to the UAE's successful removal from the "grey list" of countries under increased monitoring for money laundering. The UAE had been on this list since March 2022, with the Financial Action Task Force (FATF) expressing concerns about potential money laundering and terrorism financing through banks, precious metals and stones, and real estate sectors. This listing had negatively impacted the country's reputation, reduced investment, and created challenges for entrepreneurs conducting international business from the UAE.
Here are the actions taken by the UAE authorities:
- Enhanced legislation, including the Corporate Tax law, to improve transparency and tighten financial controls.
- Established a specialized court to expedite money laundering cases.
- Strengthened audits by requiring banks and financial institutions to conduct more thorough customer screenings and report suspicious transactions.
These efforts paid off in 2024 when the UAE achieved its goal of being removed from the list. FATF president Raja Kumar acknowledged that the country had "taken substantial steps" to enhance its financial crime-fighting system. Bhavin Shah, a Dubai-based financial crime expert, noted that the UAE's removal from the list "restores the global business community's trust in the UAE to have a robust framework to fight financial crimes."
On the chart: Dubai Financial Market General Index (DFM General). The stock market dived after news of the UAE being added to the list in 2022. But after they split out, things started looking up on the charts. Source: Investing.com
If you're involved in any entrepreneurial activity or freelancing, you must register for Corporate Tax. However, registration and tax payment are only required if your annual turnover is over AED 1,000,000.
Yes, otherwise you'll get an AED 10,000 fine.
If you're involved in any entrepreneurial activity or freelancing, you must register for Corporate Tax. However, registration and tax payment are only required if your annual turnover is over AED 1,000,000.
Dividends are not taxed (0%). However, there are certain criteria to be met.
Company owners pay no tax if they have a real job and employment contract with the company, but they pay 9% tax if they just own shares without working there or receiving income from an Unincorporated Partnership
Whew, that's a lot of information! Don't worry, we've got your back. Just send us a message, and we'll guide you through the Corporate Tax rules and regulations. 🤝
Who's exempt from paying Corporate Tax in the UAE?
Mainland
- Businesses with an annual taxable profit of less than 375,000 AED get a 0% tax rate.
- Small and Medium Enterprises with revenue below AED 3,000,000 a year can apply for tax relief but need to meet certain criteria.
- Exempt Industries: government entities, extractive businesses, public benefit entities, qualified investment funds, social security funds.
Free Zones
Companies operating in Free Zones often get a full tax break, usually for up to 50 years, if they meet the requirements for Qualified Free Zone Persons (QFZP) registration:
Companies operating in Free Zones often get a full tax break, usually for up to 50 years, if they meet the requirements for Qualified Free Zone Persons (QFZP) registration:
- Registration with a Free Zone Authority. You need to register your company with a Free Zone authority and ensure you have a strong presence in the country. That way, your business will be recognized as a legit company operating within the Free Zone, and you'll benefit from their rules and benefits.
- Qualifying activities and earning qualifying income. Your company should be doing qualifying activities, as defined in the CT law. Any income your business makes from these activities is a qualifying income. There are more details about qualifying income, do contact us for clarifications.
- Complying with the UAE's Transfer Pricing Rules. Your business should follow the UAE's transfer pricing rules, as mentioned in Articles 34 and 55 of Federal Decree Law 47 from 2022. These rules guarantee that when affiliated companies do business, they do it at a fair price. So there's no dodging taxes or manipulating things through internal transactions.
- Businesses with an annual taxable profit of less than 375,000 AED get a 0% tax rate.
- Small and Medium Enterprises with revenue below AED 3,000,000 a year can apply for tax relief but need to meet certain criteria.
- Exempt Industries: government entities, extractive businesses, public benefit entities, qualified investment funds, social security funds.
Let's find out if your business fits the above criteria and will be exempt from paying Corporate Tax.
The simplified formula is:
Revenue — Cost Taxable Basic (>AED 375,000)
FAQ
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Our managers are always ready to answer your questions. You can call us during the weekends and at night. Also, you can visit our office for a personal consultation.
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Indeed, certain business activities such as banking, insurance, investment funds, or headquarters businesses fall under the purview of the UAE’s economic substance regulations. In total, there are nine regulated categories, and the reporting requirements hinge on the extent of the company’s “economic presence” within the UAE. Check out our free video consultation to find out more.
Yes, you can hire an accountant in your team or even let your assistant do the job but it’s very time-consuming and there is a risk of being not compliant with FTA rules which also change from time to time. We’re always happy to check your books and guide you in the right direction.
Prices for outsourced accounting start from as low as AED 1,300/month (with very cost-effective yearly packages), check out movingo accounting packages here.
No matter the package, Movingo accounting support always includes such basic services as the recording of sales, purchases, and expenses, payroll accounting, and basic reports. The final price will depend on the number of transactions per month and additional services. Check out movingo accounting packages here.
Our accountants, tax advisors, business relocation experts, and lawyers speak English, Arabic, and Russian.
According to the UAE Federal Decree-Law No. 47 of 2022 on taxation of corporations, all business activities must register for Corporate Tax in the UAE.
Yes, it is included in every package as it is mandatory by the Federal Decree-Law No. (8) of 2017 on Value Added Tax and Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses. Check out Movingo accounting packages here.
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MOVINGO FOR ACCOUNTING AND BOOKKEEPING CO. L.L.C
Al Safiya Bldg, 3F-66, Dubai, UAE | License #1341688
Al Safiya Bldg, 3F-66, Dubai, UAE | License #1341688
