Corporate Tax Services

UAE Corporate Tax: Who Pays and How Much?

The UAE’s new corporate tax framework includes two key components:

Standard Rate: A competitive 9% tax applies to most businesses on taxable income exceeding AED 375,000 (approx. USD 102,000).

Multinational Enterprise (MNE) Rate: Large multinational groups with global revenue above AED 3.15 billion (approx. USD 860 million) may fall under a different tax rate aligned with international tax rules (OECD’s BEPS 2.0 framework).

Who’s Covered?

The corporate tax applies to a broad range of businesses and sectors:

• Commercial License Holders: Any company operating commercially in the UAE, regardless of ownership, is subject to the tax.

• Free Zone Companies: These businesses can access tax benefits if they meet specific conditions and do not engage in mainland UAE operations.

• Foreign Entities with UAE Operations: Companies with a physical presence or management control in the UAE are also subject to the tax.

• Financial Institutions: Banks and other financial service providers are included.

• Key Sectors: Activities like construction, real estate, agencies, and brokerage fall within the tax scope.

This overview simplifies who is subject to corporate tax in the UAE and outlines the applicable rates.

Exemptions from Corporate Tax in the UAE

The UAE offers several exemptions and benefits under its corporate tax regime. Here’s a streamlined overview:

Automatically Exempt:

• Government entities and their controlled entities (as officially listed).

Exempt Upon Application (Ministry of Finance):

• Companies engaged in the extraction of natural resources (e.g., oil, gas) or related non-extractive activities.

Exempt with Federal Tax Authority (FTA) Approval:

• Qualifying public benefit entities (e.g., charities, educational institutions).

• Public and private pension and social security funds.

• Approved investment funds.

• Wholly owned UAE subsidiaries of exempt entities (such as qualifying investment funds or government bodies).

Additional Tax Advantages:

• No corporate tax on dividends or capital gains from qualifying shareholdings.

• Certain intra-group transactions and business restructurings may qualify for exemptions under defined conditions.

What’s Always Tax-Free (For Individuals):

• Salaries and employment income (public or private).

• Interest and savings from personal bank accounts.

• Investment income of foreign investors (dividends, capital gains, etc.).

• Personal real estate investments.

• Income from personally held shares or securities.

Free Zone Benefits (With Conditions):

The UAE will continue honoring Free Zone tax benefits for companies that:

• Do not conduct business with the UAE mainland.

• Qualify as a “Qualified Free Zone Person” (QFZP), meeting conditions such as:

  • Maintaining substantial UAE presence (substance test).

  • Earning “Qualifying Income” as per the tax law.

  • Not opting into the standard corporate tax regime.

  • Complying with transfer pricing rules.

Note: All Free Zone businesses must still file annual corporate tax returns.

Corporate Tax Impact Areas

Multinational Companies (MNCs):

Despite introducing a corporate tax, the UAE’s low rates, transparency, and ease of doing business remain attractive to global enterprises.

Mergers & Acquisitions (M&A):

• Tax-efficient structures may offer benefits like exempt dividends and capital gains.

• Increased due diligence is advised to ensure smooth handling of tax liabilities during acquisitions.

Foreign Direct Investment (FDI):

The corporate tax system supports the UAE’s vision to diversify beyond oil, strengthening its reputation as a hub for technology, innovation, and skilled talent—while preserving personal tax-free income.

Possible Cost Increases:

While incentives remain, operational and compliance costs could rise slightly for some businesses.

Registration, Filing & Payment:

• All taxable entities (including those in Free Zones) must obtain a Corporate Tax Registration Number.

• Tax returns and payments are due within nine months after the end of the financial year.

Key Takeaways on UAE Corporate Tax:

Individuals: Personal income not linked to UAE business activity remains untaxed.
Non-residents: Only income tied to UAE operations or permanent establishments is taxable.
Business Profits: Tax is based on adjusted accounting net profits.
Free Zones: Still enjoy benefits if criteria are met.
Natural Resources: Continue under separate emirate-level taxation.

Tax Relief and Structuring Options:

• Dividends & Capital Gains: May be exempt under certain conditions.

• Withholding Tax: Generally 0% for domestic and cross-border payments.

• Tax Groups: Eligible businesses can form tax groups and share losses across group entities.

• Group Relief: Intra-group transfers and restructures may qualify for relief.

• Foreign Tax Credit: Taxes paid abroad can be credited against UAE corporate tax.

Tax Reporting & Standards:

• Transfer Pricing: Aligned with OECD principles.

• Accounting Standards: International standards apply (with flexibility for small entities).

• Simplified Reporting: Available for start-ups and smaller businesses.