Corporate tax in UAE
The UAE has officially issued a federal decree law on taxing business profits. The UAE Ministry of Finance implemented a federal corporation tax, that came into effect on or after 1 June 2023 and is a form of direct tax levied on the net income or profit of companies and other businesses. The UAE’s stance towards a global minimum tax on multinational corporations demonstrates its commitment to international tax reform and willingness to collaborate with other nations to maintain a fair playing field for all enterprises. Overall, the adoption of corporate taxes in the UAE is a key milestone in the country’s economic development, with favourable implications for the country’s future economic growth and prosperity.
Key aspects of the corporate tax system
- UAE corporate tax is a Federal Tax that applies to all Emirates. The tax income received will be divided equally between the Federal and Emirati governments.
- The Ministry of Finance will continue to be the ‘Competent Authority’ for the purposes of bilateral/multilateral agreements and the international exchange of information for purposes of taxation.
- The Federal Tax Authority will be in charge of administering, collecting, and enforcing UAE corporate tax.
- With certain exclusions, UAE Corporate Tax will apply to all UAE businesses and commercial activities.
According to corporate tax law, the following individuals are exempt from registration:
- A government entity
- A government-controlled entity
- A person engaged in an extractive business
- A person engaged in a non-extractive natural resource business
- A non-resident with only state-sourced income and no PE in the UAE.
A resident natural person would be subject to corporation tax solely on revenue generated by commercial activity within the UAE, but a resident juridical person would be subject to corporate tax on income generated both within and outside the UAE.
A non-resident, on the other hand, would be subject to Corporate Tax on the income obtained from
- Permanent establishment of such non-resident person in the UAE.
- Income derived from the UAE that is not due to such non-resident person’s permanent residency in the UAE.
- Non-resident person’s nexus in the UAE, i.e., income from any immovable property in the UAE.
The corporate tax rate in UAE
Taxable profit |
Tax rate |
| Taxable profit is more than AED 3,75,000 | Liable to pay tax at the rate of 9% on taxable profit. |
| Taxable profit is less than AED 3,75,000 | Zero taxation on taxable income |
Registration for corporate tax
The UAE’s Federal Tax Authority (FTA) permitted early registration for corporate tax using EmaraTax, the nation’s digital tax services platform.
Compulsory audit of accounts
According to Article 54(2) of the corporate tax law, the following individuals are obligated to prepare and maintain audited financial statements:
- A taxable person with revenue exceeding AED 50 million
- A qualifying free zone person
Free Zone Persons
A free zone person is a judicial person that is incorporated, set up, or otherwise registered in a free zone, including a branch of a registered non-resident person.
Qualifying free zone person
A free zone entity in the UAE can be a “Qualifying free zone person” with 0% Corporate Tax on appropriate income if it has
- A significant presence in the UAE,
- Earns qualifying income,
- opts out of standard Corporate Tax rates,
- Follows the Arm’s Length Principle and Transfer Pricing rules,
- Has non-qualifying revenue within De Minimis limits, and
- Prepares audited financial statements.
If these prerequisites fail to be satisfied, you will be classified as an ordinary taxable entity for five tax periods, with all income taxed at 9%.
The corporate Tax rate on qualifying free zone
Income sources |
Tax Rate |
Qualifying income |
0% |
Taxable income that is not qualifying income without the threshold benefit of AED 375,000. |
9% of taxable income |
Qualifying Income
Qualifying Income includes income from transactions with free zone persons (excluding certain activities), income from transactions with non-free zone persons related to qualifying activities that aren’t excluded, and other income that satisfies the de minimis requirements. These requirements are satisfied if QFZP’s non-qualifying revenue in a tax period is lower than the higher of:
- 5% of the total revenue; or
- AED 5 million.
- Non-Qualifying Revenue
- Non-qualifying revenue includes:
- Revenue from excluded activities
- Revenue from non-qualifying activities in case of transaction with a non-free zone person.