What is Corporate Tax in UAE
Many business owners often ask, What is Corporate Tax in UAE? In simple terms, it is a direct tax charged on the net income or profits earned by companies and other legal entities from their business activities. Sometimes it is also referred to as corporate income tax or business profits tax. This tax applies to most businesses in the country, except those involved in extracting natural resources, which remain under emirate-level taxation. Foreign individuals or companies are only subject to this tax if they are regularly or continuously carrying out business in the UAE.
To put it simply, What is Corporate Tax in UAE means that all types of profits and income recorded in a company’s financial statements are covered under the same tax rules, ensuring fairness and consistency across different sectors.
Reasons behind introducing Corporate Tax in UAE
The UAE decided to bring in corporate tax for a number of important reasons. It helps strengthen the country’s reputation as a reliable and forward-looking business hub. It also aligns with global expectations on fair tax practices and prevents harmful tax practices. At the same time, it provides the government with a steady source of revenue to fund long-term national goals. Finally, the move reflects the UAE’s commitment to international agreements on tax transparency and accountability.
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Corporate Tax Implementation in UAE
Since 1 June 2023, the UAE has started applying corporate tax on companies that are either set up in the country or managed from it, covering their worldwide income. Non-resident businesses also come under the tax net if they earn income from the UAE or operate through a permanent establishment. Even individuals running business activities are required to pay corporate tax if their yearly turnover crosses AED 1 million. The system applies a 0% rate on taxable income up to AED 375,000 and a 9% rate on income above that limit. To fully understand these rules, businesses first need to ask What is Corporate Tax in UAE and how it affects their operations.
Any company that falls under this law must register with the Federal Tax Authority, prepare audited financial statements, and file their tax returns within nine months of the financial year’s end. Staying compliant is not just about avoiding penalties, but also about clearly understanding What is Corporate Tax in UAE and making sure all obligations are met on time.
Who must register for Corporate Tax in UAE
Understanding What is Corporate Tax in UAE also means knowing who is required to register for it. All businesses that fall under the taxable category must complete registration, whether they are mainland companies, free zone entities, or foreign businesses that are managed or controlled from within the UAE. Even individuals who run regular business activities are expected to register. The registration deadline is tied to the trade license date, and missing it can lead to a penalty of AED 10,000.
Non-resident companies are not off the hook either. They must register if they have a permanent place of business in the UAE, if they earn income from the country without having that establishment, or if they maintain a business connection known as a nexus. To stay on the safe side, it is essential to know What is Corporate Tax in UAE and ensure timely registration to avoid unnecessary penalties.
Businesses exempt from Corporate Tax in UAE
When asking What is Corporate Tax in UAE, it’s important to note that not all companies fall under its scope. Some entities are completely exempt, such as government bodies and state-controlled companies, oil and gas firms already paying taxes under emirate-level laws, registered public welfare organizations, pension and social security funds, as well as certain qualifying investment funds. In addition, companies fully owned and managed by these exempt entities are also not required to pay corporate tax.
There is also a relief scheme for smaller businesses. If a company makes less than AED 3 million in a tax year, it can claim this relief and won’t need to pay corporate tax until the end of 2026. To get a clear picture of What is Corporate Tax in UAE and to confirm whether your business qualifies for exemption or small business relief, it’s always a smart move to seek advice from trusted corporate tax consultants.
Read Also: UAE exempts late registration fines under corporate tax law
Corporate tax benefits for free zone companies in UAE
Many business owners wonder, What is Corporate Tax in UAE and how does it apply to free zone entities. Free zones still provide attractive tax incentives, but companies must meet certain conditions to continue enjoying a 0% corporate tax rate on eligible income. They need to comply with all the free zone’s rules and avoid carrying out business directly with the UAE mainland.
If a company qualifies as a “Qualifying Free Zone Person,” it may take advantage of the 0% tax rate on specific types of income. To fully understand What is Corporate Tax in UAE and whether your business can benefit from these free zone incentives, it’s always best to consult with experienced corporate tax advisors in the country.
Corporate tax rates explained in the UAE
The UAE keeps its corporate tax system simple and easy to follow:
- No tax is charged on income up to AED 375,000.
- A 9% tax applies to income above AED 375,000.
- Multinational groups with annual revenue over €750 million will face a 15% tax starting January 2025, which includes a 6% top-up tax in line with global OECD rules.
These measures are designed to stop global corporations from moving profits to low-tax countries just to reduce their tax bills. For local businesses, it’s important to understand how these rules affect them, which leads to the common question: What is Corporate Tax in UAE and how does it apply to different business structures. By having a clear grasp of What is Corporate Tax in UAE, companies can plan ahead and manage their finances more effectively.
How can AHG support your business
Dealing with taxes is not always straightforward, and trying to handle everything on your own can lead to mistakes or missed deadlines. That’s where AHG steps in. Our team of experienced tax experts in the UAE keeps up with the latest rules and ensures that your business stays compliant without the extra stress.
We guide you through every step, from understanding What is Corporate Tax in UAE to helping with registration and timely filing of returns. With AHG by your side, you not only get clarity on your tax responsibilities but also the peace of mind that your corporate tax matters are being handled correctly. So, if you’ve ever wondered What is Corporate Tax in UAE and how it affects your company, AHG is here to make the process smooth and hassle-free.
Managing finances as an influencer in the UAE can get complicated, but AHG makes it easier. With our experience in influencer accounting, we handle everything from tax compliance to financial planning, so If you need any tax services or tax consultancy, you won’t find better than AHG Legal Accounts. Each of our teams has extensive experience in this field and will provide you with the best services in a professional manner. Please feel free to contact us today, we are always waiting for your request to be fulfilled!
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