The United Arab Emirates (UAE) has long been an attractive destination for businesses due to its tax-friendly environment.
However, with the introduction of the UAE corporate tax law, businesses must now pay close attention to how taxes are calculated and which rules apply.
Whether you’re a small local company, a multinational corporation, or an investor in the UAE, it’s crucial to understand the changes and their implications for your operations.
Read on and discover everything you need to know about the UAE corporate tax law, from who it affects, the tax rates, how to calculate corporate tax, and the key provisions every business needs to follow.
What is UAE Corporate Tax Law?
The UAE corporate tax law is a significant reform introduced by the UAE government to align with international tax standards.
For the first time, businesses in the UAE will be required to pay tax on their profits, except for a few exemptions.
- The law was enacted through Federal Decree-Law No. 47 of 2022.
- Corporate tax will be applied to the profits of most businesses operating in the UAE, with some exceptions.
- The new tax regime aims to provide a sustainable source of revenue for the UAE while maintaining a business-friendly environment.
Who Needs to Follow the UAE Corporate Tax Law?
The new corporate tax law will affect most businesses in the UAE. However, certain businesses, such as those in free zones or in specific sectors, may have different obligations.
- ✅ Local businesses: Most companies that generate profits will need to comply.
- ✅ Multinational corporations: Large companies with operations in the UAE will need to pay corporate tax at a rate of 15% if they meet specific criteria.
- ✅ Free zone businesses: Businesses operating in free zones may be exempt from corporate tax for a set period, depending on their activities and the specific free zone regulations.
For foreign companies, the UAE corporate tax law applies when they have a presence in the UAE, either through branches or subsidiaries.
📚 Also read: How to Register for Corporate Tax in UAE: 2025 Guide
Key Features of UAE Corporate Tax Law
Understanding the main features of the UAE corporate tax law helps businesses navigate the new requirements. Here’s a quick overview of the tax rates and how they apply.
Corporate Tax Rates: What You Need to Know
- ✅ 0% tax rate: Applied to taxable income up to AED 375,000.
- ✅ 9% tax rate: Applied to taxable income exceeding AED 375,000.
- ✅ 15% tax rate: Applied to multinational corporations with profits exceeding the threshold set by international tax standards. This aligns the UAE with global tax agreements.
These rates are competitive when compared to corporate tax rates in other countries, making the UAE an appealing place for businesses.
How to Calculate Corporate Tax
Calculating your corporate tax is a straightforward process. Here’s what you need to do:
- ✅ Step 1: Determine your total income (revenue).
- ✅ Step 2: Subtract your allowable business expenses (wages, rent, operational costs, etc.).
- ✅ Step 3: Apply the applicable tax rate to the remaining taxable income.
By following these steps, you can easily determine the amount of corporate tax you owe.
Registration for UAE Corporate Tax
Businesses in the UAE that meet the criteria must register for corporate tax with the Federal Tax Authority (FTA). This process ensures that your company complies with the new tax laws.
Do You Need to Register for Corporate Tax?
- If your company earns profits above AED 375,000, you must register for corporate tax.
- Businesses in free zones may also need to register depending on their activities outside the free zone.
How to Register for Corporate Tax
- ✅ Online registration: The process is simple and can be completed through the FTA portal.
- ✅ Documents required: Be prepared to submit financial records and business information for tax assessment.
- ✅ Penalties: Companies that fail to register by the required deadlines may face penalties.
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📚 Also read: How to Calculate Corporate Tax in UAE: Step-by-Step Process
Special Considerations for Foreign Companies
Foreign companies operating in the UAE may have specific tax obligations under the UAE corporate tax law. These businesses must ensure they comply with the local tax requirements, as well as benefit from available tax agreements.
Tax Benefits for Foreign Companies
- ✅ Double taxation agreements (DTAs): The UAE has signed DTAs with numerous countries to prevent businesses from paying taxes on the same income in both their home country and the UAE.
- ✅ Exemption from certain taxes: Foreign companies may be eligible for tax exemptions based on their activities and the provisions of the DTA.
Establishing a Presence in the UAE
- Foreign companies can also benefit from the UAE corporate tax law by setting up a branch or subsidiary in the country, enabling them to tap into the business-friendly environment.
- Once established, these companies must comply with the tax laws like local businesses, including filing taxes and making payments on time.
Exemptions and Deductions under UAE Corporate Tax Law
Certain businesses and activities qualify for exemptions or deductions under the UAE corporate tax law, helping to reduce their tax burden.
Participation Exemption for Dividends and Capital Gains
- ✅ Companies that receive dividends or capital gains from investments in other companies may be exempt from paying corporate tax on these earnings.
- ✅ This encourages investment and helps businesses expand their portfolios.
Tax Deductions for Specific Activities
- ✅ Companies engaged in research and development (R&D), employee training, or business expansion activities may be eligible for tax deductions.
- ✅ These deductions help businesses reduce their taxable income and reinvest in growth.
UAE Corporate Tax Law Filing and Payment
Once your taxable income is calculated, it’s time to file and pay your corporate tax. Here’s a breakdown of the filing and payment process.
Filing Your Corporate Tax Return
- ✅ Filing process: Corporate tax returns can be filed electronically through the FTA portal.
- ✅ Required documents: Financial statements, records of income and expenses, and any supporting documents for deductions.
- ✅ Filing deadlines: Businesses must file their tax returns by the deadlines set by the FTA to avoid penalties.
Penalties for Late Filing
- ✅ Businesses that miss the filing deadline or fail to pay their taxes on time will face penalties, which may include fines or interest charges.
- ✅ These penalties are meant to encourage timely tax filings and payments.
Staying Compliant with UAE Corporate Tax Law
The UAE corporate tax law marks a new chapter for businesses operating in the country. While the law introduces new requirements, it is designed to ensure that the UAE stays competitive and continues to meet global tax standards.
By understanding the key provisions, registering your business, and adhering to filing deadlines, you can navigate this change successfully and keep your business in compliance.
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Frequently Asked Questions on UAE Corporate Tax Law
What is the new tax law in UAE?
The new UAE corporate tax law requires businesses to pay taxes on their profits, with a 9% rate on profits exceeding AED 375,000. The law aims to diversify the UAE’s revenue sources and align with global tax standards.
What is the 15% Corporate Tax in the UAE?
The 15% corporate tax applies to multinational corporations with substantial operations in the UAE. It ensures that the UAE complies with international tax norms for large businesses.
Is it mandatory to register for Corporate Tax in the UAE?
Yes, businesses earning profits above AED 375,000 must register for corporate tax with the Federal Tax Authority (FTA). Free zone companies may also need to register depending on their income sources.
What is Article 23 of the Corporate Tax law UAE?
Article 23 deals with the taxation of certain income and specifies the conditions under which specific business activities are subject to corporate tax. It provides rules for determining which activities can benefit from exemptions.
How to calculate UAE corporate tax?
To calculate corporate tax, subtract allowable business expenses from your total revenue to determine your taxable income. Apply the appropriate tax rate (9% for profits above AED 375,000) to your taxable income to determine your tax liability.
What is the corporate tax reform in UAE 2025?
The corporate tax reform in 2025 may introduce further changes to the law, such as adjustments to tax rates and new incentives for specific sectors or types of businesses.
