Corporate Tax in UAE : Explained

Under the UAE Corporate Tax framework, Resident and Non-Resident companies must register for Corporate Tax. When a company registers for CT, it receives a Corporate Tax Registration Certificate. The FTA sets the registration deadline based on the company’s license issue date. If a company fails to register before the deadline, the FTA charges a penalty of AED 10,000.

The UAE requires companies to file their Corporate Tax Return and submit their financial report with full disclosure for the financial year 2024. Companies must follow the filing schedule under Federal Decree-Law No. 47 of 2022. The filing deadline depends on the company’s financial year structure.

The UAE classifies Taxable Persons as either Residents or Non-Residents.

Category – Resident

• Companies incorporated in the UAE, including those in free zones (DMCC, RAKEZ, etc.) or the mainland (Dubai Economy), must register for Corporate Tax.

• Foreign companies that effectively manage their UAE operations from within the UAE must register.

• Individuals who reside in the UAE, hold a valid visa, and carry out business activities must register.

Category – Non-Resident

• Individuals who are not UAE residents must register if they operate a Permanent Establishment (place of business) in the UAE that generates revenue of AED 1 million or more.

• Foreign companies must register if they operate a branch or Permanent Establishment in the UAE.

Any gross income generated under the category of both resident and non-resident, by the place of business in the UAE, the following rates will apply:

1. 0% rate on AED 0 – AED 375,000 of Taxable profits
2. 9% rate on the amount that exceeds AED 375,000

Under the category of Companies established in freezones, the rates applicable will differ based on gross income generated under Qualifying income criteria or Non-Qualifying income criteria, the following rates will apply:

1. 0% rate applicable on Qualifying income category
2. 9% rate applicable on Non-Qualifying income category

Business eligible to opt for Small Business relief, where in the business has not to pay Corporate Taxes on the Income generated for the tax period and can continue to follow cash basis accounting (if it used to in the past) and simpler accounting rules (i.e., Transfer Pricing) can be applied.

A) Eligibility – Conditions

• Required to elect every year for relief
• Income generated should be equal or less than AED 3 million, in both current year and pervious year
• Both Resident and Non-Resident persons are eligible to opt

B) Cannot claim for this relief – Conditions

• Activity Criteria – If the company activity as Financial Institute or Holding company
• Income generated Criteria – Small businesses members of MNE’s (Multinational Enterprises Group), small businesses cannot claim for relief if the Group income is of AED 3.5 billion
• Qualifying Free zone persons Criteria – If a qualifying person comes under the category of 0%, then cannot claim for relief

Companies established in the UAE freezone, may be categorised under 0% rated if criteria mentioned below is met.

Adequate level of presence criteria :

• Company’s core income is earned within the freezone, ensuring a permanent address in present within the UAE and the right number of employees are part of the team.

Income generated criteria :

• If the freezone conducts business within freezone under certain activities.
• If the freezone conducts business with outside freezone under certain activities.

Transferring pricing criteria:

• Comply with Transferring pricing rules and regulations in line with OECD’s arm’s length principle
• As per requirement, companies must maintain supporting documentation for transactions conducted between related parties.

IFRS criteria:

• Audited financials must be in accordance with IFRS (International Financial Reporting Standards)

Submission of Audited Financial Statements:

• Preparing and submitting financial statements as per annual corporate tax returns, clearly mentioning gross income earned from Qualifying and Non income.