What is Corporate Tax?

Corporate tax in the UAE is a federal tax on business profits, effective from June 2023, and applies uniformly across all Emirates. Businesses earning profits of AED 375,000 and above are taxed at a 9% rate, while profits below this threshold are taxed at 0%. The tax aligns the UAE with global standards while preserving its business-friendly environment.

The introduction of corporate tax marks a significant shift in the UAE’s business landscape, especially as the country was long known for its zero-tax environment.

Corporate tax filing is now an essential compliance step for businesses operating in the UAE. It is calculated annually and applies only if a business’s taxable income exceeds AED 375,000, beyond which a 9% tax is levied. Businesses earning below this threshold are taxed at 0%.

Why Was Corporate Tax Introduced?

The UAE implemented corporate tax to:

• Align with global tax standards such as the OECD’s Base Erosion and Profit Shifting (BEPS) framework.
• Diversify government revenue away from oil and ensure long-term economic sustainability.
• Enhance transparency and improve the UAE’s position in global financial markets.

Despite this change, the UAE continues to offer a competitive business environment with one of the lowest corporate tax rates globally. Many companies are now turning to corporate tax filing firms in the UAE to ensure timely and accurate submissions that meet legal and regulatory requirements.

Who Does Corporate Tax Apply To?

Corporate tax applies to:

• All UAE-incorporated businesses, including mainland and free zone companies (with some exceptions)
• Foreign legal entities if they earn income from the UAE or have a permanent establishment here.
• Natural persons (individuals) conducting business or commercial activity in the UAE above a certain threshold.

However, the following are not subject to corporate tax:

• Salaried individuals and employees
• Real estate investments made in a personal capacity (not as a licensed business)
• Dividends and capital gains earned by individuals from personal investments

If you’re unsure how to manage your tax obligations, consulting with experienced corporate tax filing firms in the UAE can help you stay compliant, avoid penalties, and navigate the transition to the new tax regime smoothly.