UAE Corporate Tax, also covering individuals’ business profits
The United Arab Emirates ended their decades long status as a tax-free country. The UAE Corporate Tax Law has been published in November 2022. Corporate tax on taxable business profits applies to all companies from 01/01/2024, whether they are mainland or free zone companies. The UAE corporate tax rate is 9% flat.
Business profits of natural persons, individual entrepreneurs, is also subject to 9% corporate tax, although they are not corporations.
Certain exemptions apply, subject to conditions.
Please note:
In addition the the very brief information following, please read our dedicated page about UAE taxes.
Bookkeeping is Mandatory
All companies are legally obliged to keep their books properly and in good order.
All UAE free zone companies companies must submit their audited annual financial statements to the UAE tax authorities.
UAE mainland companies must submit their audited annual financial statements to the UAE tax authorities if their annual turnover is AED 50 million or above.
UAE Corporate Tax is 9% Flat
Based on the UAE Corporate Tax Law published in November 2022, the corporate tax rate is fixed at 9%. There are no progressive tax rates.
The corporate tax is calculated based on profitable profit. Dividends received by a company are not categorized as taxable profit.
Basically, the taxable profit is calculated as following. The example is simplified, there may be other items to be considered, based on a company’s specific situation.
Sales revenues,
– cost of sales (= purchases)
– general costs and expenses related to the business (stationary and others)
– office rent
– salaries
– business-related interest payments (if any)
= taxable business profit.
Taxation of Natural Person’s Business Profits
It is important to mention that taxable business profits of individual entrepreneurs who do their business in their own name, as a natural person, are also subject to corporate tax at a rate of 9%, for any annual taxable profit of AED 1 million and above (USD 272,480). This is information is especially important for free-lancers, but not limited to them.
Exemptions from UAE Corporate Tax
There are some exemptions to corporate tax liability of companies. Please note that the corporate tax exemptions are not granted to companies that do not maintain proper accounts and that so not submit their annual financial statements to the tax authorities. In case of free zone companies, the annual financial statements must be audited.
‘Transitional Easement’ Exemption:
The UAE corporate tax legislation grants a temporary exemption for business profits from revenues not exceeding AED 3,000,000 (USD 817,439) per tax period, which are taxed at a rate of 0% (zero percent), until and including the financial year ending on 31/12/2026.
‘SME Support’ Exemption:
To support SMEs (Small and Medium Enterprises), any business profits up to AED 375,000 are taxed at a rate of 0% (zero percent). This rule is referred to as ‘SME Support’
‘Qualifying Free Zone Person’ Exemption:
The corporate tax rate applied to the profit of a free zone company is 0% (zero percent), if:
- … a Qualifying Free Zone Person (Company)…
- … derives Qualifying Income…
- … from Qualifying Activities…
- … except Excluded Activities.
As per Article 7 (“Maintaining Adequate Substance in a Free Zone and Outsourcing”) of the “Cabinet Decision No. 55 of 2023 on Determining Qualifying Income for the Qualifying Free Zone Person”, a Qualifying Free Zone Person “shall;
- undertake its core income-generating activities in a Free Zone and,
- having regard to the level of the activities carried out, have adequate assets,
- an adequate number of qualified employees,
- and incur an adequate amount of operating expenditures”.
Please find further definitions of the above four conditions on our dedicated page about UAE taxes.
Our Offer to You:
We offer a complementary general consulting of max. 30 minutes about the application of the UAE Corporate Tax Law and its related Cabinet and Ministerial Decisions during a Zoom video meeting, based on your general questions related to corporate taxation in the UAE.
Please note that our offer does not cover advisory in respect of your particular company, case or situation. Personalized advisory would be subject to charge.
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