Overview of UAE corporate tax
For many years the United Arab Emirates was known for having no corporate tax at all. That changed in June 2023, when a federal corporate tax regime was introduced for the first time. The aim was to align the UAE with global tax standards while keeping the country attractive for business and investment.
Corporate tax rate
Since June 1, 2023, the UAE introduced a federal corporate tax at a standard rate of 9% for profits exceeding AED 375,000. Certain small businesses and qualifying free zone companies may benefit from exemptions or zero rates, provided they meet regulatory conditions.
Value-Added Tax (VAT)
VAT in the United Arab Emirates is levied at 5% on most goods and services. Businesses must register for VAT if their annual revenue exceeds the threshold and complies with reporting and filing obligations.
No Personal Income Tax in the United Arab Emirates
The UAE currently does not levy personal income tax, making it an attractive destination for employees, entrepreneurs, and investors.
Other Taxes and Compliance
- Excise tax applies to specific goods such as tobacco and sugary drinks.
- Customs duties may apply to imported goods.
- Businesses must maintain accurate records and comply with reporting obligations to avoid penalties.
Exemptions and free zones
Certain entities are exempt from corporate tax. This includes government bodies, extractive industries that already pay royalties to the state, and some non-profit organisations.
Free zone companies can still benefit from their existing tax incentives if they meet the “qualifying income” criteria. This typically requires maintaining adequate substance in the free zone and conducting only permitted activities with other free zone businesses or overseas clients. However, income earned from mainland UAE customers may be subject to the standard corporate tax rate.
Deductible expenses and losses
Businesses can generally deduct expenses that are wholly and exclusively incurred for taxable purposes. Some expenses, such as entertainment, have partial restrictions. Tax losses can be carried forward and offset against future profits, subject to certain limits.
Filing and compliance
Corporate tax returns must be filed annually with the Federal Tax Authority (FTA). Companies must register for corporate tax, keep proper accounting records and prepare financial statements in accordance with accepted accounting standards. The specific filing deadline depends on the financial year-end of the business but is generally within nine months after the end of the relevant tax period.
International alignment
The introduction of corporate tax brings the UAE in line with OECD global minimum tax discussions and enhances its reputation for transparency. For businesses, it means planning ahead to understand the impact of the tax on operations, pricing and profit distribution.
Why it matters for businesses
The UAE remains a competitive location thanks to its low rate, strategic location and strong infrastructure. However, corporate tax adds a new layer of compliance. Understanding the rules, especially for free zone companies and cross-border operations, is essential to avoid penalties and make the most of available exemptions.
The UAE offers a tax-efficient environment, but compliance is essential. Prism Dubai can connect you with trusted local tax advisors to ensure your business maximizes available benefits while staying fully aligned with UAE regulations. With our one-stop support, combining bookkeeping, corporate setup, and expert tax guidance, you can focus on growing your business.
