Question 1

What is Corporate Tax?

Accepted Answer

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.'

Question 2

Who has to pay corporate tax in the UAE?

Accepted Answer

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.

Question 3

What does 'Business' or 'Business Activity' mean under the UAE Corporate Tax Law?

Accepted Answer

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.

Question 4

Who is exempt from UAE corporate tax?

Accepted Answer

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.

Question 5

Who counts as a UAE tax resident for corporate tax purposes?

Accepted Answer

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.

Question 6

How do UAE corporate tax laws apply to residents?

Accepted Answer

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.

Question 7

Who is considered a non-resident for UAE corporate tax?

Accepted Answer

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.

Question 8

How does corporate tax apply to non-residents?

Accepted Answer

Non-residents are only taxed on: Income earned through a Permanent Establishment in the UAE, and UAE-sourced income, which may be subject to a 0% withholding tax.

Question 9

How is taxable income calculated?

Accepted Answer

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.

Question 10

What is a tax period?

Accepted Answer

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.

Question 11

What are the UAE’s corporate tax rates?

Accepted Answer

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) and 9% tax on income above AED 375,000. Qualifying Free Zone companies: 0% on qualifying income and 9% on other income that doesn’t meet the qualifying criteria.

Question 12

How much tax would a business pay on AED 1 million in taxable income?

Accepted Answer

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.

Question 13

What tax relief is available for small businesses?

Accepted Answer

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).

Question 14

What does 'revenue' mean?

Accepted Answer

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.

Question 15

Do I need to pay corporate tax in addition to Emirate-level taxes?

Accepted Answer

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.

Question 16

Do I still have to pay government service fees?

Accepted Answer

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.

Question 17

Is excise tax the same as corporate tax?

Accepted Answer

No. Excise Tax and Corporate Tax are different and both apply in the UAE.

Question 18

What does the Federal Tax Authority (FTA) do?

Accepted Answer

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.

Question 19

What does the Ministry of Finance do?

Accepted Answer

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.

Question 20

Who needs to register for Corporate Tax?

Accepted Answer

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.

Question 21

Who is a 'natural person'?

Accepted Answer

A 'natural person' is defined as an individual in the UAE Corporate Tax Law.

Question 22

Are individuals subject to Corporate Tax?

Accepted Answer

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.

Question 23

Does Corporate Tax apply to income an individual earns from a business outside the UAE?

Accepted Answer

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.

Question 24

What if an individual runs more than one business?

Accepted Answer

They must file a single Corporate Tax return that covers all taxable business activities.

Question 25

Are self-employed persons, such as freelancers, subject to corporate tax?

Accepted Answer

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.

Question 26

Is Corporate Tax applied to personal investment returns?

Accepted Answer

No. Dividends, capital gains, and similar income earned by individuals from holding shares or securities personally are not subject to Corporate Tax.

Question 27

Is real estate income taxed?

Accepted Answer

No. Income from personal investments in UAE real estate by individuals is generally not subject to Corporate Tax.

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