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Corporate Tax is a form of direct tax levied on the net income of corporations and other businesses. It is sometimes also referred to as “Corporate Income Tax” or “Business Profits Tax” in other jurisdictions.

Broadly, Corporate Tax applies to the following “Taxable Persons”:

  • UAE companies and other juridical persons that are incorporated or effectively managed and controlled in the UAE;
  • Natural persons (individuals) who conduct a Business or Business Activity in the UAE as specified in a Cabinet Decision to be issued in due course; 
  • Non-resident juridical persons (foreign legal entities) that have a Permanent Establishment in the UAE (which is explained under Section 8).
    Juridical persons established in a UAE Free Zone are also within the scope of Corporate Tax as “Taxable Persons” and will need to comply with the requirements set out in the Corporate Tax Law.

There are certain types of businesses or organizations that are exempted from pating Corporate Tax given their importance and contribution to the social fabric and economy of the UAE. These are known as Exempt Persons and include:

  • Automatically Exempt – Government entities & Government controlled entities that are specified in cabinet decisions. 
  • Exempt if notified to the Ministry of Finance (and subject to meeting certain conditions) – Extractive businesses and non-extractive natural resource businesses. 
  • Exempt of listed in a content decision – Qualifying public benefit entities.
  • Exempt if applied to and approved by the Federal Tax Authority (and subject to meeting certain conditions) – Public or private pension & social security funds, qualifying investment funds, Wholly-owned & controlled UAE subsidiaries of a government entity, a government controlled entity, a qualifying investment fund, or public or private pension or social security fund. 

In addition to not being subject to Corporate Tax, Government Entities, Government Controlled Entities that are specified in a Cabinet Decision, Extractive Businesses and Non-Extractive Natural Resource Businesses may also be exempted from any registration, filing and other compliance obligations imposed by the Corporate Tax Law, unless they engage in an activity which is within the charge of Corporate Tax.

Corporate Tax will be levied at a headline rate of 9% on Taxable Income exceeding AED 375,000. Taxable Income below this threshold will be subject to a 0% rate of Corporate Tax.
Corporate Tax will be charged on Taxable Income as follows:

Resident Taxable Persons
Taxable income not exeeding AED 375,000
(this amount is to be confirmed in a cabinet decision)
Taxable income exeeding AED 375,000 9%
Qualifying Free Zone Persons
Qualifying income0%
Taxable income that does not meet the qualifying income definition9%

A 0% withholding tax may apply to certain types of UAE sourced income paid to non-residents. Because of the 0% rate, in practice, no withholding tax would be due and there will be no withholding tax related registration and filing obligations for UAE businesses or foreign recipients of UAE sourced income. 
Withholding tax does not apply to transactions between UAE resident persons.

All Taxable Persons (including Free Zone Persons) will be required to register for Corporate Tax and obtain a Corporate Tax Registration Number. The Federal Tax Authority may also request certain Exempt Persons to register for Corporate Tax.

Taxable Persons are required to file a Corporate Tax return for each Tax Period within 9 months from the end of the relevant period. The same deadline would generally apply for the payment of any Corporate Tax due in respect of the Tax Period for which a return is filed.

Illustrated below are examples of the registration, filing and payment deadlines associated for Taxable Persons with a Tax Period (Financial Year) ending on 31 May or 31 December (respectively). 

1.Read the Corporate Tax Law and the supporting information available on the websites of the Ministry of Finance and      the Federal Tax Authority.
2.Use the available information to determine whether your business will be subject to Corporate Tax and if so, from what date.
3.Understand the requirements for your business under the Corporate Tax Law, including, for example: 
a.Whether and by when your business needs to register for Corporate Tax;
b.What is the accounting / Tax Period for your business; 
c.By when your business would need to file a Corporate Tax return;
d.What elections or applications your business may or should make for Corporate Tax purposes;
e.What financial information and records your business will need to keep for Corporate Tax purposes; 
4.Regularly check the websites of the Ministry of Finance and the Federal Tax Authority for further information and guidance on the Corporate Tax regime.