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In 2023, the UAE will introduce its first corporate tax

What is Corporate Tax

Corporate tax is a form of direct tax levied on the net income or profit of corporations and other business entities. It is also commonly known as ‘Corporate Income Tax’ or Business Profits Tax.’

In simple words, it is a tax levied on the net profit made by the businesses. It requires companies to pay a certain percentage of profit as tax.

What is the date of implementing the federal corporate tax in UAE?

For the first time, the United Arab Emirates will impose a federal corporate tax on business profits. This represents a significant shift for a country known for attracting businesses from around the world. The tax will take effect on June 1, 2023. Generally, the UAE will charge 9% of taxable income exceeding 375,000 UAE dirhams ($102,000) and zero for taxable income less than that amount, according to the ministry. In addition, the UAE is expected to have one of the most competitive corporate tax regimes in the world, it added.

As long as individuals’ earnings are not related to a UAE business or trade, they will not be subject to tax. Additionally, foreign investors who do not conduct business in the country won’t be subject to the tax. Basically, corporate tax is applied to the “adjusted accounting net profits” of the business.

According to the ministry, free zone businesses – thousands of them exist in the country – can continue to benefit from corporate tax incentives if they meet all requirements. In addition to zero taxes, free zones within the UAE allow for full foreign ownership.

Who should pay corporate in UAE?

All the businesses whose taxable profit (net) is more than 375,000 AED fall under the purview of corporate tax and are required to pay a certain percentage of net profit as corporate tax.

What are the businesses or incomes that are outside the scope of corporate tax?

Given the profit threshold of 3,75,000 AED, all businesses that exceed the threshold have to pay the corporate tax. However, certain types of business or income are exempt from corporate tax. Below is the list of companies or income exempt from corporate tax:

  • Individuals will not be subject to corporate tax. As a result, any income from employment, real estate, investments in shares, and other personal income unrelated to a trade or business in the UAE will be exempt from corporate tax
  • Not applicable to foreign investors who do not carry on business in UAE
  • Corporate tax incentives are currently being offered to free zone businesses that comply with all regulatory requirements will continue.
  • Capital gains and dividends received by UAE businesses from its qualifying shareholdings are exempt from corporate tax
  • Not applicable on qualifying intragroup transactions and restructurings.

How is corporate tax in UAE calculated?

Corporate tax in UAE is calculated at 9% on the net profit shown in the company’s financial statements. For example, If the net profit is 200,000 AED, the corporate tax will be 18,000 AED (200,000 X 9/100). We guess it should be simple as this, but we need to wait for guidelines from authorities on arriving at the taxable net profit.


Embrace the New Era with UAE CT Offerings from Alya

Most top businesses in the country have already begun their UAE CT readiness assessments.

Early preparation for corporate tax compliance is critical to avoiding higher implementation costs as well as reducing the pressure on internal teams to complete these preparations within a tight last-minute deadline.

At ALYA Corporate Tax Services, our expertise and experience will help you navigate this new landscape and ensure your organization makes a smooth and seamless transition to the Corporate Tax era.