UAE Corporate Tax Explained — Everything Your Business Needs to Know
UAE Corporate Tax Explained — Everything Your Business Needs to Know
AD 71 Tax Consultancy LLC | أبوظبي
Why This Matters for Your Business
In June 2023, the UAE introduced Corporate Tax for the first time in its history. Many business owners are still unsure: does it apply to them? How much will they pay? And what can legally be reduced?
This article answers those questions directly.
What Is Corporate Tax?
A direct tax applied to the net profits of companies and individuals conducting business in the UAE. It is governed by Federal Decree-Law No. 47 of 2022 and administered by the Federal Tax Authority (FTA).
Tax Rates
| Taxable Income | Rate |
|---|---|
| AED 0 – 375,000 | 0% |
| Above AED 375,000 | 9% |
| Multinationals under Pillar Two rules | 15% |
✅ The UAE maintains one of the world's most competitive Corporate Tax rates.
Who Is Subject to Corporate Tax?
Includes:
- All UAE-registered companies (LLC, sole establishments, public companies)
- Free Zone companies — with potential 0% rate on qualifying income
- Individuals conducting business with annual revenue exceeding AED 1 million
- Foreign companies with a Permanent Establishment in the UAE
Excludes:
- Employment income (salaries)
- Personal investment income (stocks, personal real estate)
- Government entities and qualifying non-profit organizations
How Is Taxable Income Calculated?
Taxable income is based on the net accounting profit in your financial statements, with certain permitted adjustments:
Allowable deductions ✅
- Actual business operating costs and expenses
- Employee salaries and benefits
- Depreciation and amortization
- Loan interest (within set limits)
Non-deductible items ❌
- Fines and penalties
- Personal expenses
- Donations to non-qualifying entities
Free Zones — Are You Eligible for 0%?
Free Zone companies may benefit from a 0% rate on "Qualifying Income" under specific conditions:
- Maintaining genuine economic substance in the Free Zone
- Not exceeding the de minimis threshold for non-qualifying revenue
- Full compliance with FTA requirements
- Not electing to be subject to the standard 9% rate
⚠️ Income from Mainland dealings may be subject to 9% — consult a specialist before making decisions.
Key Deadlines
| Obligation | Deadline |
|---|---|
| Registration | Within 3 months of incorporation or license issuance |
| Filing Corporate Tax return | Within 9 months of financial year end |
| Payment of tax due | Same deadline as return filing |
⚠️ Late registration penalty: AED 10,000.
5 Steps to Get Ready Now
1. Register your business with the FTA If you haven't registered yet, do so immediately to avoid penalties.
2. Review your financial statements Ensure your accounting accurately reflects reality and supports your tax return.
3. Clarify your Free Zone status If you operate in a Free Zone, verify your 0% rate eligibility with a tax advisor.
4. Document all deductible expenses Every documented business expense = a reduction in your taxable income.
5. Engage a qualified tax advisor An error in your tax return can cost far more than the price of professional advice.
How AD 71 Can Help
- Registering your business for Corporate Tax correctly and on time
- Assessing your Free Zone status and eligibility for the 0% rate
- Preparing and filing your annual Corporate Tax return
- Strategic tax planning to legally minimize your tax liability
📞 Contact us today for a free consultation