The introduction of corporate tax in the UAE marks a significant shift in the country’s fiscal landscape. While the UAE has traditionally been known for its tax-free environment, the implementation of a federal corporate income tax has changed the way companies — both local and international — operate. Whether you’re a small business owner, an investor, or part of a multinational corporation, understanding the nuances of the new tax regime is essential.
In this guide, our legal experts at Nax Law explain everything you need to know about corporate tax in the UAE, including who is affected, how it’s calculated, what compliance looks like, and how businesses can prepare strategically.
What is corporate tax in the UAE?
Corporate tax (CT) is a direct tax levied on the net income or profit of corporations and other businesses. In the UAE, corporate tax was officially introduced with Federal Decree-Law No. 47 of 2022, and applies to financial years starting on or after 1 June 2023.
Who is subject to corporate tax?
The UAE corporate tax applies to:
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Companies incorporated in the UAE, including free zone entities.
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Branches of foreign companies operating in the UAE.
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Foreign companies and individuals conducting business in the UAE in an ongoing or regular manner.
However, the following are exempt or subject to special rules:
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Government entities
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Extractive businesses
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Non-extractive natural resource businesses
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Qualifying public benefit entities
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Investment funds (meeting certain conditions)
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Certain qualifying free zone persons (with 0% rate if compliant)
What is the corporate tax rate?
The standard corporate tax rate in the UAE is 9%, applicable to taxable income exceeding AED 375,000. Income below this threshold is taxed at 0%, as part of the UAE’s commitment to support small and medium enterprises.
There is also a 0% corporate tax rate for qualifying free zone entities that meet specific substance and compliance requirements.
Key concepts and definitions
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Taxable income: Calculated based on accounting net profit, as per IFRS standards, with specific adjustments.
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Tax group: UAE allows for group taxation where companies can elect to be treated as a single taxable entity.
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Transfer pricing: Businesses must comply with OECD-aligned transfer pricing rules and maintain documentation.
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Withholding tax: Generally not applicable in the UAE under the new regime.
How does corporate tax affect free zone companies?
Companies in free zones can continue to enjoy a 0% corporate tax rate only if they:
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Maintain adequate economic substance in the UAE.
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Derive qualifying income (e.g., from business with other free zone entities or outside UAE).
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Do not earn income from the UAE mainland (unless under special rules).
Failing to meet these criteria may subject them to the standard 9% rate.
Corporate tax compliance requirements
To comply with corporate tax regulations in the UAE, businesses must:
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Register with the Federal Tax Authority (FTA).
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Obtain a Tax Registration Number (TRN).
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File annual corporate tax returns within 9 months of the end of the financial year.
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Maintain financial statements prepared according to accounting standards.
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Keep transfer pricing documentation, if applicable.
Non-compliance may result in penalties, denial of incentives, or loss of free zone benefits.
Strategic considerations for businesses
To adapt to the new tax framework, companies should:
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Conduct a corporate tax impact assessment.
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Review group structures, revenue sources, and cross-border transactions.
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Ensure proper transfer pricing policies and documentation.
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Seek legal advice to determine eligibility for exemptions or free zone incentives.
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Update accounting systems and internal controls for accurate reporting.
How Nax Law can help on with the corporate tax in the UAE
Navigating the complexities of corporate tax in the UAE requires a deep understanding of local laws and international tax principles. At Nax Law, our team of tax lawyers and legal advisors offers:
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Corporate tax planning and compliance
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Legal structuring of entities for tax efficiency
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Assistance with free zone classification and substance requirements
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Transfer pricing documentation and risk management
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Representation in case of disputes or audits by the FTA
Whether you’re setting up a business in Abu Dhabi, operating from a free zone in Dubai, or expanding across the GCC, we help ensure your company is compliant and strategically positioned in the new tax environment.
