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The introduction of corporate tax in the UAE marks a significant shift in the country’s fiscal landscape. While the UAE has traditionally been known for its tax-free environment, the implementation of a federal corporate income tax has changed the way companies — both local and international — operate. Whether you’re a small business owner, an investor, or part of a multinational corporation, understanding the nuances of the new tax regime is essential.
In this guide, our legal experts at LEXPERT explain everything you need to know about corporate tax in the UAE, including who is affected, how it’s calculated, what compliance looks like, and how businesses can prepare strategically.
What is corporate tax in the UAE?
Corporate tax (CT) is a direct tax levied on the net income or profit of corporations and other businesses. In the UAE, corporate tax was officially introduced with Federal Decree-Law No. 47 of 2022, and applies to financial years starting on or after 1 June 2023.
Who is subject to corporate tax?
The UAE corporate tax applies to:
Companies incorporated in the UAE, including free zone entities.
Branches of foreign companies operating in the UAE.
Foreign companies and individuals conducting business in the UAE in an ongoing or regular manner.
However, the following are exempt or subject to special rules:
Government entities
Extractive businesses
Non-extractive natural resource businesses
Qualifying public benefit entities
Investment funds (meeting certain conditions)
Certain qualifying free zone persons (with 0% rate if compliant)
What is the corporate tax rate?
The standard corporate tax rate in the UAE is 9%, applicable to taxable income exceeding AED 375,000. Income below this threshold is taxed at 0%, as part of the UAE’s commitment to support small and medium enterprises.
There is also a 0% corporate tax rate for qualifying free zone entities that meet specific substance and compliance requirements.
As an exception, the corporate tax rate is 15% for large multinational groups with global revenues of €750 million or more in at least two of the last four years.
Key concepts and definitions
Taxable income: Calculated based on accounting net profit, as per IFRS standards, with specific adjustments.
Tax group: UAE allows for group taxation where group companies can elect to be treated as a single taxable entity.
Transfer pricing: Businesses must comply with OECD-aligned transfer pricing rules and maintain documentation.
Withholding tax: Currently not applicable in the UAE, however it may change in the future.
How does corporate tax affect free zone companies?
Companies in free zones can continue to enjoy a 0% corporate tax rate only if they:
Maintain adequate economic substance in the UAE.
Derive qualifying income (e.g., from business with other free zone entities or outside UAE).
Do not earn income from the UAE mainland (unless under special rules).
Comply with transfer pricing requirements.
Audit their financial statements.
Failing to meet these criteria may subject them to the standard 9% rate.
Corporate tax compliance requirements
To comply with corporate tax regulations in the UAE, businesses must:
Register with the Federal Tax Authority (FTA).
Obtain a Tax Registration Number (TRN).
File annual corporate tax returns within 9 months of the end of the financial year.
Maintain financial statements prepared according to accounting standards.
Keep transfer pricing documentation, if applicable.
Non-compliance may result in penalties, denial of incentives, or loss of free zone benefits.
Strategic considerations for businesses
To adapt to the new tax framework, companies should:
Conduct a corporate tax impact assessment.
Review group structures, revenue sources, and cross-border transactions.
Ensure proper transfer pricing policies and documentation.
Seek legal advice to determine eligibility for exemptions or free zone incentives.
Update accounting systems and internal controls for accurate reporting.
How can LEXPERT help on with corporate tax in the UAE
Navigating the complexities of corporate tax in the UAE requires a deep understanding of local laws and international tax principles. At LEXPERT, our team of tax lawyers and legal advisors offers:
Corporate tax planning and compliance
Legal structuring of entities for tax efficiency
Assistance with free zone classification and substance requirements
Transfer pricing documentation and risk management
Representation in case of disputes or audits by the FTA
Whether you’re setting up a business in Abu Dhabi, operating from a free zone in Dubai, or expanding across the GCC, we help ensure your company is compliant and strategically positioned in the new tax environment.
