Corporate Tax in UAE
The introduction of Corporate Tax (CT) in the UAE has reshaped the financial environment for businesses across the nation, including major hubs like Dubai and Abu Dhabi. Announced by the UAE Ministry of Finance and effective for financial years starting on or after June 1, 2023, this direct tax on corporate net income represents a significant step towards aligning the UAE with global tax standards while maintaining one of the most competitive tax rates worldwide. At HLB HAMT, we are dedicated to helping businesses navigate these changes, ensuring compliance, and maximizing tax efficiency.
The Federal Corporate Tax Law, formalized through Federal Decree-Law No. (47) of 2022, applies to all corporate entities and business activities throughout the UAE, including free zones and mainland businesses.
Innovative People
Brighter Futures.
Understanding Corporate Tax in UAE
This new tax regime, set at a competitive 9% rate on non-qualifying income, aims to bolster the UAE’s fiscal system while maintaining a business-friendly environment. With an expert team of transfer pricing assessments corporate tax consultants in Dubai, HLB HAMT is ready to support businesses with tailored tax solutions.
Explore our Corporate Tax Services in UAE
Applicability and Exemptions
Corporate Tax in Dubai and across the UAE applies to nearly all business and commercial activities, with some notable exemptions designed to support specific sectors:
Automatically Exempt
Government entities and certain government-controlled entities.
Conditional Exemptions
Extractive and non-extractive natural resource businesses under Emirate-level taxation, qualifying public benefit entities, pension and social security funds, and qualifying investment funds, provided they meet specified conditions.
Special Income Exemptions
Dividends, capital gains from qualifying shareholdings, qualifying intra-group transactions, and certain income earned by individuals from personal investments, real estate, and securities.
The Federal Corporate Tax Law, formalized through Federal Decree-Law No. (47) of 2022, applies to all corporate entities and business activities throughout the UAE, including free zones and mainland businesses. This new tax regime, set at a competitive 9% rate on non-qualifying income, aims to bolster the UAE’s fiscal system while maintaining a business-friendly environment. With an expert team of corporate tax consultants in Dubai, HLB HAMT is ready to support businesses with tailored tax solutions.
Compliance and Filing Requirements
Businesses operating in the UAE are required to file their corporate tax returns electronically within nine months from the end of their financial year. The introduction of CT does not necessitate advance tax payments, and UAE group companies can opt to file a single consolidated return, simplifying the compliance process.
How HLB HAMT Can Assist You
HLB HAMT’s comprehensive transfer pricing assessments Corporate Tax services in UAE are designed to help businesses not only comply with new regulations but also leverage opportunities for growth and optimization. Our team of dedicated corporate tax consultants in Dubai and Abu Dhabi brings in-depth knowledge and a proactive approach to managing your tax obligations.
Strategic Tax Planning and Impact Assessment
Qualitative Analysis
Evaluate the impact of UAE Corporate Tax and transfer pricing assessmentsTransfer Pricing regulations on your business operations.
Financial Assessment
Analyze the potential financial implications of the new tax on your business.
Opportunity Identification
Highlight areas for restructuring and optimization to enhance tax efficiency.
Tailored Implementation Solutions
Contract and Policy Adjustments
Revise contracts and develop tailored transfer pricing policies that align with UAE Corporate Tax regulations.
Organizational Restructuring
Implement necessary structural adjustments to comply with new tax rules.
Tax Clarifications and Rulings
- Obtain required clarifications and rulings from the Federal Tax Authority (FTA) to ensure accurate compliance.
Ongoing Compliance and Support
CT Registration
Navigate the registration process smoothly with our expert guidance.
Tax Returns and Documentation
Prepare and file accurate transfer pricing assessmentsfor corporate tax returns and transfer pricing documentation.
Continuous Advisory
Receive ongoing support and updates on regulatory changes to keep your business compliant.
Why Choose HLB HAMT for Corporate Tax Services in UAE?
With over transfer pricing assessments 25 years of expertise in the region, HLB HAMT is a trusted partner for businesses looking to adapt to the evolving tax landscape. Our experienced team of corporate tax consultants in Dubai is committed to providing personalized service, helping you meet compliance requirements, optimize tax outcomes, and drive your business forward.
UAE Corporate Tax: A Comprehensive Overview
UAE-Sourced Income
The Corporate Tax (CT) Law outlines specific criteria to determine if income qualifies as UAE-sourced. Generally, income is considered UAE-sourced if it’s:
- Derived from a UAE resident entity.
- Derived from a non-resident entity and attributable to its permanent establishment (PE) in the UAE.
- Derived from activities conducted, assets located, capital invested, rights issued, or services rendered or benefited from within the UAE.
Taxable Persons and Tax Base
| Resident Person | Tax Base |
|---|---|
| An entity incorporated in the UAE (including Free Zone entities) | Worldwide income |
| A foreign entity that is effectively managed and controlled in the UAE | Worldwide income |
| An individual conducting business or business activity in the UAE | Worldwide income |
| Non-Resident Person | Tax Base |
|---|---|
| Has a permanent establishment (PE) in the UAE | Taxable income attributable to the PE |
| Derives income sourced from the UAE | UAE-sourced income not attributable to the PE |
| Has a nexus in the UAE | Taxable income attributable to the nexus |
Free Zone Persons and Qualifying Free Zone Persons (QFZPs)
While Free Zone entities are generally taxable, those qualifying as QFZPs can benefit from a 0% UAE CT rate on their Qualifying Income. Non-qualifying income will be taxed at the standard 9% rate.
To qualify as a QFZP, an entity must:
- Be a Free Zone Person.
- Maintain adequate economic substance in the UAE.
- Derive Qualifying Income (defined by a Cabinet Decision).
- Not elect to be subject to the standard UAE CT regime.
- Comply with transfer pricing rules and documentation requirements.
- Meet any additional conditions set by the Ministry of Finance.
Family Foundations and Qualifying Groups
A family foundation is an entity established to manage family wealth. A Qualifying Group must meet specific criteria regarding ownership, residency, and financial reporting
Tax Groups
Tax Credit, Taxable Income, and Taxation of Individuals
The UAE offers a Foreign Tax Credit to prevent double taxation. Taxable income is generally based on accounting net profit, with certain deductions and restrictions. Individuals are not subject to personal income tax in the UAE, except for business income generated through a commercial license.
Participation Exemption, Partnerships, and Tax Losses
Dividends and other profit distributions from certain ownership interests can be exempt from tax under the Participation Exemption. Partnerships are classified as unincorporated or incorporated, with different tax implications. Tax losses can be carried forward and offset against future taxable income, subject to limitations.
Investment Funds and Tax Sectors
Investment funds are subject to UAE CT unless they meet specific criteria. The extraction industry, banking, real estate, asset management, and public benefit organizations may have specific tax treatments.
Transfer Pricing and BEPS Pillar 2
The UAE has transfer pricing rules to ensure transactions between Related Parties are at arm’s length. The country is also expected to implement BEPS Pillar 2’s Globe rules to address base erosion and profit shifting.
What corporate tax rate applies to my entity, and how will it affect my business plans and after-tax returns to shareholders in 2025?
The UAE Corporate Tax (CT) applies to all businesses operating within the UAE, with some exceptions. The law is effective for financial years starting on or after June 1, 2023.
The CT is structured with a three-tier rate:0% for businesses with taxable income not exceeding AED 375,000 or for those classified as eligible free zone entities.
9% for businesses with taxable income exceeding AED 375,000.
A higher rate (expected to be 15%) may apply to members of multinational groups with revenues above EUR 750 million.
How can I ensure that my existing related party transactions comply with the arm’s length transfer pricing requirements?
Related party transactions should reflect the taxable income that would have occurred if the transactions had been conducted under the arm’s length principle, as if they were between unrelated parties. Transactions between entities in different consolidated corporate tax groups with varying tax profiles (such as loss-making entities or those subjected to different effective tax rates) may face increased scrutiny from the Tax Authority due to potential profit shifting to entities with lower tax rates.
Can my organization’s entities in the UAE consolidate into one filing group, what are the benefits, and what changes are needed for compliance?
Yes, your organization’s entities can consolidate, which offers benefits like reduced administrative burdens and the ability to share losses, helping to lower the effective corporate tax rate. To successfully implement this under the new corporate tax regime, businesses need to adopt processes for compliance and reporting, including understanding transfer pricing and consolidation rules. With the law effective on June 1, 2023, businesses must ensure their systems can capture required information by July 1, 2023, in preparation for their first tax return filing in 2024 or 2025.
Is there a detailed fixed asset register that clearly distinguishes between depreciable fixed assets and capital items to optimize the depreciation allowance for corporate tax?
When calculating taxable profit, expenses can be deducted as long as they are incurred wholly and exclusively for the business’s operations. One of the key deductions available is for amortization or depreciation of fixed assets.
What is the business’s current and projected loss position from a corporate tax perspective and how can existing losses within the group be effectively utilized?
Corporate tax is generally applied to profits, meaning it is not imposed on entities that are making losses. However, regulations under the corporate tax regime outline how these losses can be utilized or carried forward for tax purposes.