Frequently Asked Questions (FAQs)
Corporate Tax is a direct tax charged on businesses' profits or net income. In other jurisdictions, it’s also called “Corporate Income Tax” or “Business Profits Tax.”
Corporate Tax in the UAE applies to businesses that are legally registered in the country or are effectively managed and controlled from within the UAE. It also applies to foreign companies that have a permanent establishment in the UAE.
Individuals are only subject to Corporate Tax if they are engaged in a business or business activity in the UAE, either directly or through an unincorporated partnership.
Under the UAE Corporate Tax Law, “Business” or “Business Activity” refers to any kind of economic activity done by a person, whether it’s ongoing or for a short period. This usually involves an intent to make a profit and some level of structure or organisation. Even if a business doesn’t earn a profit, it still counts as a business for tax purposes.
For companies and other juridical persons, all their activities and assets (used or held) are generally treated as part of their business.
For individuals, income can come from salaries, investments, or running a commercial, industrial or professional activity—either directly or as a sole proprietor.
Certain entities are either automatically exempt from UAE Corporate Tax or can apply for exemption. These include:
- UAE Federal and Emirate governments, along with their departments, authorities, and public institutions.
- Companies fully owned by the government that carry out specific tasks and are listed in a Cabinet Decision.
- Businesses involved in extracting natural resources and related non-extractive activities in the UAE, as long as they meet certain conditions and are taxed at the Emirate level.
- Public Benefit Entities listed in a Cabinet Decision.
- Investment funds that meet the required conditions.
- Public or private pension and social security funds that meet specific rules.
- UAE juridical persons wholly owned and controlled by certain exempt entities, if they meet the necessary conditions.
Companies registered in the UAE—like LLCs, PSCs, PJSCs, and other legal entities—are considered residents for corporate tax.
Individuals running a business or business activity in the UAE are also seen as residents for tax purposes.
Foreign companies may be treated as UAE tax residents if they are effectively managed and controlled from within the UAE. This usually depends on where key business decisions are made.
UAE resident juridical persons must pay corporate tax on income earned both in the UAE and abroad.
However, income from foreign branches or subsidiaries may be exempt if it meets certain conditions.
If foreign income isn’t exempt, taxes paid abroad can usually be credited against UAE corporate tax to avoid double taxation.
A juridical person is considered a non-resident if it is registered in another country and effectively managed from outside the UAE. A natural person is considered a non-resident if they are not running a business or business activity in the UAE.
Non-residents are only taxed on:
- Income earned through a Permanent Establishment in the UAE
- UAE-sourced income, which may be subject to a 0% withholding tax
Taxable income is based on the business’s accounting net profit (or loss) for the year, as shown in financial statements that follow international accounting standards. Adjustments must be made for things like:
- Unrealised gains or losses
- Exempt income like qualifying dividends and capital gains
- Income derived from intra-group transactions
- Non-deductible expenses
- Transactions with Related Parties or Connected Persons
- Relevant group tax loss transfers
- Available tax incentives or reliefs
- Any other adjustments set by the Ministry
Since corporate tax is charged yearly, businesses must define their 'tax period.' This will usually follow the calendar year (1 January to 31 December), unless the business uses a different 12-month period for its financial statements.
Here’s how corporate tax (CT) is applied:
- Individuals and juridical persons (companies):
- 0% tax on income up to AED 375,000 (to be confirmed by Cabinet Decision)
- 9% tax on income above AED 375,000
- Qualifying Free Zone companies:
- 0% on qualifying income
- 9% on other income that doesn’t meet the qualifying criteria
Here’s the breakdown:
- First AED 375,000 taxed at 0% = AED 0
- Remaining AED 625,000 taxed at 9% = AED 56,250
Total corporate tax due: AED 56,250
Note: This amount can be lowered if the business qualifies for tax credits.
Aside from the 0% rate for the first AED 375,000 of taxable income, small businesses with revenue below a certain limit can apply for Small Business Relief.
If approved, they’ll be treated as having no taxable income during the relevant tax period and may follow simpler tax rules.
This relief must be formally requested from the Federal Tax Authority (FTA).
Revenue is the total income a business earns during a tax period before subtracting any costs.
It includes income from selling goods or services, royalties, interest, dividends, premiums, and other earnings.
For example, sales revenue is counted in full, without deducting expenses like cost of goods sold or service costs.
If your business is involved in extracting natural resources or in specific non-extractive activities already taxed at the Emirate level—and meets certain conditions—it won’t fall under the UAE Corporate Tax system.
Other businesses may need to pay both Emirate-level taxes and Federal Corporate Tax. However, Emirate-level taxes cannot be used to reduce or offset Federal Corporate Tax.
Yes. Fees for things like business setup, licence renewals, and other services must still be paid to local and federal authorities. These fees are considered tax-deductible if they are directly related to your business operations.
No. Excise Tax and Corporate Tax are different and both apply in the UAE.
The FTA is in charge of managing, collecting, and enforcing Corporate Tax and other federal taxes. It also provides guidance, answers queries, and offers public education on tax matters.
The Ministry of Finance handles international tax matters, including tax agreements and information exchange. It also issues rules, regulations, and further guidance on Corporate Tax and other federal taxes.
Any business that is subject to Corporate Tax must register and secure a Corporate Tax Registration Number. In some cases, the FTA may also ask exempt businesses to register.
UAE branches of a domestic company are considered part of their 'parent' company or 'head office' and don’t need to register separately or file separate tax returns.
A 'natural person' is defined as an individual in the UAE Corporate Tax Law.
Yes—if they are carrying out a business or business activity as defined in an upcoming Cabinet Decision. Individuals not engaged in such activities will generally not be taxed under UAE Corporate Tax.
If the individual (natural person) is running a UAE-based business, all income linked to that business—including income earned from abroad—will be subject to Corporate Tax.
They must file a single Corporate Tax return that covers all taxable business activities.
Only if their work is considered a taxable business under the law. If they qualify, they won’t pay tax on the first AED 375,000 of profit, and they may also be eligible for small business relief.
No. Dividends, capital gains, and similar income earned by individuals from holding shares or securities personally are not subject to Corporate Tax.
No. Income from personal investments in UAE real estate by individuals is generally not subject to Corporate Tax.
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