UAE Corporate Tax, explained properly

Taxable persons carrying on a business in the UAE. That covers UAE juridical persons, foreign juridical persons that are effectively managed and controlled in the UAE or that have a permanent establishment here, and natural persons carrying on a business or business activity under a licence.

It applies to financial years starting on or after 1 June 2023. For a company with a calendar year end, the first tax period was the year ended 31 December 2024.

On taxable income, which starts from accounting profit and is then adjusted under the Corporate Tax Law. Revenue only matters for specific tests such as Small Business Relief and the free zone de minimis.

A natural person carrying on a business under a licence is within the regime. Registration is required once turnover from business activities exceeds AED 1 million in a Gregorian calendar year.

Employment income of a natural person is not a business activity for corporate tax purposes. The regime taxes business income, not wages.

Income not derived through a licence, such as personal real estate investment income of a natural person, is not treated as a business or business activity and is not included in the turnover test.

It can. A foreign juridical person is a resident person if it is effectively managed and controlled in the UAE. If not resident, it may still be taxed on income attributable to a UAE permanent establishment or on UAE sourced income.

A UAE branch of a foreign company is generally treated as a permanent establishment of that company rather than as a separate juridical person.

The Corporate Tax Law provides for a withholding tax mechanism, currently at a rate of 0%, so no withholding tax is presently collected on the categories it covers.

0% on taxable income up to AED 375,000, and 9% on taxable income above that threshold.

Article 3(1) of the Corporate Tax Law, with the threshold set by Cabinet Decision No. 116 of 2022.

Only if each is a separate taxable person. Where companies form a tax group, the group is the taxable person and the 0% band applies once to its combined taxable income.

No. A single taxable person applies the 0% rate to its first AED 375,000 once per tax period.

Yes. Cabinet Decision No. 142 of 2024 introduced a Top-up Tax on multinational enterprise groups within the OECD Pillar Two framework, at a minimum rate of 15%. Entities in scope must register with the FTA separately. It is distinct from the 9% corporate tax that applies generally, and it does not affect ordinary UAE businesses.

A qualifying free zone person pays 0% on qualifying income and 9% on income that is not qualifying income. A free zone company that does not qualify is taxed under the standard rules on all its taxable income.

Yes. Registration is a separate obligation from paying. Persons within the scope of the law must register within the timeframe set by the FTA, whether or not tax is ultimately payable.

For resident juridical persons that existed before 1 March 2024, the deadline was set by the month the licence was issued, regardless of the year of issue. The table is set out in FTA Decision No. 3 of 2024 and reproduced above.

The earliest licence issuance month is used to identify the applicable deadline.

The deadline was three months from that date.

On EmaraTax, the FTA's online portal.

Yes. Free zone companies are inside the corporate tax regime. Qualifying status affects the rate applied, not whether you register.

Several categories must register or apply to the FTA before their exempt status is recognised. A person applying to be treated as a qualifying investment fund, for example, is a taxable person until the application is approved, and must register within the normal timeframe.

A taxable person that ceases to carry on business, for example on liquidation, applies to deregister. Outstanding returns and liabilities have to be settled first.

Within nine months from the end of the tax period.

By the same date. The corporate tax payable is due within nine months from the end of the tax period, so there is no later payment date to rely on.

By 30 September 2026.

By 31 December 2026.

There is no general extension. A specific postponement applied to certain short tax periods ending on or before 29 February 2024, under FTA Decision No. 7 of 2024 and Public Clarification CTP004, but that is not a general rule.

One return per taxable person per tax period. A tax group files a single return covering the group.

Ordinarily the financial year used in preparing financial statements. For a natural person it is the Gregorian calendar year.

A taxable person may apply to change its tax period, subject to conditions set out in the law and the FTA's requirements.

An election under Article 21 of the Corporate Tax Law. Where it applies, the person is treated as having no taxable income for that tax period. Note it is time limited: as currently legislated it is available for tax periods ending on or before 31 December 2026, so check the position for later years.

Revenue must not exceed AED 3 million in the relevant tax period. The condition also has to have been met in all previous tax periods.

Revenue, meaning the gross amount of income derived during the tax period. A loss making business can still be over the threshold.

No. It is an election, made in the tax return. If you do not elect, you do not get it.

Yes. A natural person may elect for Small Business Relief where revenue from the taxable business does not exceed AED 3 million for each relevant tax period.

Yes. The relief is claimed in a return, so the return still has to be filed.

A qualifying free zone person cannot benefit from Small Business Relief. The two regimes are alternatives, not additions.

They are within the regime. A qualifying free zone person keeps 0% on qualifying income, and pays 9% on income that is not qualifying income.

Non-qualifying revenue in a tax period must not exceed 5% of total revenue or AED 5,000,000, whichever is lower.

The company ceases to be a qualifying free zone person from the beginning of that tax period, and for the four following tax periods.

Yes. Losing qualifying status is not a one year event. It applies from the start of the relevant tax period and then for the subsequent four tax periods.

The free zone person must undertake its core income generating activities in a free zone, and for distribution activities in a designated zone, and maintain adequate assets, full time employees and operating expenditure there to perform those activities.

There is a limited exception for qualifying intellectual property, where research and development activities may be outsourced to certain persons. Outside that, the core income generating activities have to be performed in the zone.

Yes. Preparing audited financial statements is one of the conditions for being a qualifying free zone person.

Qualifying and excluded activities are listed in Ministerial Decision No. 229 of 2025, which replaced the earlier decision. The list is specific and should be checked against what the company actually does, not against what its licence says.

It can, but income attributable to a domestic permanent establishment is treated separately and is not qualifying income.

No. Expenditure has to be incurred wholly and exclusively for the business and not be capital in nature, and specific rules disallow or restrict certain categories.

Entertainment expenditure incurred in relation to customers, shareholders, suppliers and other business partners is restricted, with only half deductible.

No. Fines and penalties are non-deductible, other than amounts awarded as compensation for damages or breach of contract.

Yes. Net interest expenditure is deductible up to the greater of 30% of adjusted EBITDA and a de minimis threshold of AED 12 million.

Disallowed net interest expenditure can be carried forward and used in the following ten tax periods, oldest first, subject to meeting the rule in those periods.

No. Carried forward net interest expenditure cannot be transferred to or used by another taxable person.

Donations are deductible only where made to a qualifying public benefit entity listed in the relevant Cabinet Decision.

Businesses preparing financial statements on an accrual basis may elect to recognise gains and losses on a realisation basis, either across all assets and liabilities subject to fair value or impairment accounting, or only for those held on capital account.

Yes, and indefinitely, subject to conditions.

Yes. The offset in any tax period is capped at 75% of taxable income for that period.

Losses may be transferred between qualifying resident juridical persons subject to the conditions in Article 38 of the Corporate Tax Law.

Your own losses must be offset against your own taxable income before any losses transferred in from another taxable person can be used.

Continuity conditions apply. A substantial change in ownership combined with a change in the nature of the business can restrict the carry forward under Article 39.

Two or more qualifying resident companies that elect to be treated as a single taxable person, filing one return.

Intra group transactions are eliminated and results are combined, so losses in one member can shelter profits in another without a separate transfer claim.

The group is one taxable person, so the AED 375,000 band applies once to the whole group rather than to each member.

Yes. A tax group must prepare aggregated financial statements, audited under a special purpose framework in line with International Standards on Auditing.

No later than nine months from the end of the relevant tax period, or another date determined by the FTA.

Standalone statements of the members, prepared under IFRS or IFRS for SMEs using uniform accounting policies, aggregated line by line with transactions between members eliminated, presented in UAE dirhams.

They apply to transactions and arrangements with related parties and connected persons, including domestic ones. They are not only a multinational issue.

A transaction meets it if the result is consistent with what would have been realised had persons who were not related parties engaged in a similar transaction under similar circumstances.

Broadly, an owner of the taxable person, a director or officer, and persons related to them. Payments to connected persons have to meet a market value test.

Documentation requirements are set out in Ministerial Decision No. 97 of 2023, which specifies which taxable persons must maintain a master file and a local file.

It can. Where a receivable from a related party ages well beyond the group's normal settlement terms without commercial rationale, the extended credit can be treated as a loan, with an arm's length interest charge expected.

Where local or regional comparables are genuinely unavailable, an audit trail demonstrating that should be maintained. Where they are available but ignored, the group policy should be re-evaluated.

Categories include government entities, government controlled entities, persons engaged in an extractive business or a non-extractive natural resource business, qualifying public benefit entities, qualifying investment funds, and certain pension and social security funds.

Not generally. A qualifying public benefit entity must meet the conditions in Article 9 and be listed in a Cabinet Decision. A qualifying investment fund must meet Article 10 and apply to the FTA.

Yes. Government entities, government controlled entities and extractive and non-extractive natural resource businesses are treated as taxable persons to the extent they carry on a business other than the exempt activity.

Gains and losses on the disposal of a participating interest are excluded from taxable income, along with related foreign exchange gains and losses. Impairment losses on a participating interest are not deductible.

A taxable person may elect to exclude the profits and losses of a foreign permanent establishment where it is subject to tax at not less than 9% and no losses from it have previously been used. No foreign tax credit is then available.

Dividends and other profit distributions received from a UAE juridical person are exempt income. Foreign dividends can be exempt where the participation conditions are met.

Requirements are set by ministerial decision. Audited statements are required for certain categories, including qualifying free zone persons and tax groups.

IFRS, or IFRS for SMEs where eligible.

Records and documents supporting the return must be retained for the period required under the Tax Procedures Law, and must be sufficient for the FTA to verify the position taken.

AED 10,000, under Cabinet Decision No. 75 of 2023.

Yes, under the FTA's waiver initiative. If the tax return, or the annual declaration for an exempt person, is filed within seven months from the end of the first tax period, the penalty is waived, and refunded if already paid.

That is the point of the initiative. The waiver window is shorter than the ordinary filing deadline, so a company that waits for the nine month date loses it.

The Tax Procedures Law provides a route: a reconsideration request to the FTA, then objection and appeal stages within set time limits.

Yes. The FTA may conduct a tax audit and request records supporting the positions taken in the return.