Corporate Tax in UAE-All you need to know

The new Corporate Tax in UAE was made applicable for all financial years starting on or after 1st June 2023. Any business that adopts a fiscal year starting after 1st June 2023 and afterward shall file their Corporate Tax return towards the year ending 2024, and thereafter every financial year based on their fiscal year.

Corporate Tax applies to all businesses and commercial activities across the Emirates, barring specific exceptions like income earned from the extraction of natural resources (subject to separate Emirate-level taxes) or certain types of personal income such as salaries and dividends. Businesses registered in free trade zones can also benefit from preferential tax treatment. However, understanding the nuances of free zone taxation is critical. For instance, income derived from immovable property within free zones may still be subject to standard rates, a topic discussed in-depth in Corporate Tax and Free Zone Taxation in the UAE.

All businesses having annual taxable profit up to AED 375000 are not taxable. Businesses having annual taxable profit of more than AED 375000 are taxable at 9%. Taxable profit shall be determined in such manner as prescribed by the UAE corporate tax law adjustments.

Certain income categories, such as dividends from qualifying shareholdings, capital gains, and profits from group restructuring, are exempt. To explore how these exemptions can facilitate business restructuring for strategic growth, refer to Business Restructuring Relief: Navigating Tax Benefits.

1. Dividend Income by UAE corporate from its qualifying shareholdings

2. Capital Gains

3. Profits arising from Group restructuring

4. Profits arising from Intra Group transactions

All businesses having qualifying business in the qualifying free zone shall be subjected to zero percentage tax on such income derived from the Qualifying Free Zone. Income from immovable properties in a QFZ is subject to uae corporate tax at 9%. This benefit shall expire by the end of the tax incentive period.

Only juridical persons can benefit from the Free Zone regime of Corporate Tax in UAE. This includes any public or private joint stock company, limited liability company, limited liability partnership and other types of incorporated entities that are established under the rules and regulations of the Free Zone.

Transfer Pricing will gain more importance in UAE business since the transactions between group companies/businesses under common control shall be under close review with the Law implementation of Corporate Tax in UAE.

A critical consideration for UAE businesses is distinguishing between state-sourced and non-state-sourced income. This distinction affects taxability and compliance requirements. Gain deeper insights in Understanding State-Sourced Income to ensure your operations align with UAE tax laws.

Losses of a tax year shall be allowed to carry forward subject to the guidelines.

Tax Groups can be formed according to the law, for entities having the same ownership subject to the regulations to file a consolidated tax return.

Understanding UAE Corporate Tax laws is not just about avoiding penalties; it’s about leveraging exemptions, adopting compliant practices, and aligning business goals with regulatory requirements. With provisions like loss carryforwards and participating interest exemptions, businesses can effectively manage liabilities while fostering growth.

For businesses operating within partnerships or investment funds, the tax implications can vary significantly. Learn how these entities are affected in Taxation of Partnerships and Investment Funds Under Corporate Tax.

As businesses in the UAE embrace this transformative tax system, staying proactive and informed is critical. Whether you’re navigating exemptions for trusts and family foundations or addressing the compliance needs of a growing SME, each aspect of the Corporate Tax system provides both challenges and opportunities.

Understanding these regulations—and strategically planning for them—ensures your business remains resilient, compliant, and primed for success in the UAE’s dynamic economic landscape. Let Kitaab guide you with expert insights and tailored solutions.