Corporate tax

The UAE introduced Federal Corporate Tax effective June 1, 2023, marking a significant shift in the tax landscape for businesses operating in the country. The standard corporate tax rate is set at 9% on taxable income exceeding AED 375,000, while a 0% rate applies to the first AED 375,000 of profits, effectively providing a substantial tax-free threshold for smaller businesses and startups. Tax periods are aligned with your company’s financial year, and filing deadlines fall within 9 months of the financial year end. Businesses with revenue under AED 3 million may qualify for small business relief, which offers exemption from maintaining full audited accounts and provides simplified compliance requirements until December 31, 2026. Government entities, extractive businesses, qualifying investment funds, and public benefit organizations are exempt from corporate tax under specific conditions outlined by the Federal Tax Authority.

Different business structures face varying corporate tax obligations and opportunities for optimization within the UAE’s comprehensive tax framework. Mainland companies are subject to the standard 9% corporate tax rate with full compliance requirements, including transfer pricing documentation for related party transactions, and can utilize unlimited tax loss carry-forward provisions. Free zone companies with qualifying income can access 0% tax rates, but must meet adequate substance requirements, refrain from conducting business with UAE mainland, maintain separate accounting for qualifying versus non-qualifying income, and comply with transfer pricing regulations. Non-qualifying free zone income is taxed at the standard 9% rate. Offshore companies generally face no UAE tax if they have no permanent establishment, but must register if conducting UAE business activities. Branches of foreign companies are taxed only on UAE-sourced income at the same 9% rate on attributable profits.

Comprehensive documentation is essential for corporate tax registration, annual return filing, and maintaining full compliance with Federal Tax Authority requirements throughout each tax period. For corporate tax registration, businesses must provide valid trade license, Emirates ID and passport of authorized signatory, Memorandum and Articles of Association, certificate of incorporation, audited financial statements where available, complete details of shareholders and directors, ultimate beneficial owner information, expected annual revenue declarations, detailed business activity descriptions, and registered office address proof. Annual tax return filing requires audited financial statements for most businesses, complete trial balance and general ledger, detailed tax computation and reconciliation statements, comprehensive transfer pricing documentation for all related party transactions, supporting schedules for income and expenses, asset and depreciation schedules, loan agreements with interest calculations, details of foreign income and tax paid abroad.

Strategic corporate tax planning and professional compliance services deliver substantial advantages that extend well beyond simply meeting regulatory obligations and avoiding penalties. Tax optimization strategies enable businesses to minimize tax liability through carefully structured legal arrangements, maximize available deductions and allowances, utilize group relief provisions effectively, optimize transfer pricing arrangements, and carry forward tax losses indefinitely to offset future profits. Free zone entities can access 0% tax rates on qualifying income, maintain separate profit streams for different business activities, optimize business structures for maximum tax efficiency, and leverage UAE’s competitive advantages in the regional market. Compliance protection safeguards your business from penalties starting at minimum AED 500 and potentially reaching up to 50% of tax due, prevents costly interest charges on late payments, maintains good standing with Federal Tax Authority, and reduces audit risks through proper documentation.

Corporate tax obligations vary significantly based on your specific business jurisdiction within the UAE, directly affecting applicable tax rates, compliance requirements, available benefits, and strategic opportunities for tax optimization. Dubai and Abu Dhabi mainland companies face full corporate tax at 9% on profits above the threshold with standard compliance requirements, but gain access to the UAE market and can participate in government tenders. Dubai free zones including DMCC, JAFZA, DAFZA and others offer potential 0% tax on qualifying income, though businesses must meet substantial substance requirements, face restrictions on mainland business activities, and maintain enhanced compliance documentation with transfer pricing obligations. Abu Dhabi free zones such as ADGM and Khalifa Industrial Zone provide similar qualifying free zone benefits with substance requirements and 0% tax potential for qualifying entities. DIFC operates as special financial free zone with strict regulatory oversight by DFSA.

Our systematic and comprehensive approach ensures proper corporate tax registration, fully compliant return filing, and ongoing optimization of your tax position throughout each financial period. Step 1 involves conducting a thorough tax assessment to evaluate your business structure, revenue levels, and operational activities to determine precise corporate tax obligations and identify potential optimization opportunities. Step 2 covers corporate tax registration, completing all required registration procedures on the FTA portal within prescribed deadlines based on your license issuance date and business commencement. Step 3 focuses on accounting system setup, implementing or upgrading accounting systems to accurately capture all tax-relevant information, track deductible expenses properly, and maintain fully compliant records. Step 4 addresses transfer pricing documentation requirements, preparing comprehensive master files and local files for all related party transactions and establishing arm’s length pricing methodologies for full compliance with regulations.