UAE Introduces corporate tax law, 9% Corporate tax applicable from june 1, 2023
UAE Corporate Tax
In accordance with UAE Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses, Corporate Tax (CT) applies to businesses from the beginning of their first financial year starting on or after 1 June 2023. The introduction of Corporate Tax strengthens the UAE's tax framework while maintaining its position as one of the world's most attractive destinations for business and investment.
Corporate Tax is a direct tax imposed on the net profits of corporations and other business entities. The UAE's Corporate Tax regime aligns with international best practices for tax transparency while continuing to support economic growth, foreign investment, and business competitiveness.
UAE Corporate Tax has been designed to promote sustainable economic growth while ensuring compliance with international tax standards and preserving the country's competitive business environment.
– UAE Ministry of Finance
- 1. What is Corporate Tax (CT)? Corporate Tax is a direct tax levied on the taxable profits or net income earned by corporations and other business entities operating in the UAE.
- 2. Business Objectives: The Corporate Tax regime supports the UAE's vision of becoming a leading global business hub, encouraging investment while meeting international tax transparency standards.
- 3. Who is Subject to CT? Corporate Tax generally applies to mainland businesses, eligible Free Zone entities, banking operations, foreign businesses with a taxable presence, and companies involved in real estate development, construction, agency, and brokerage activities.
- 4. Corporate Tax Rates: A 0% tax rate applies to taxable income up to AED 375,000, while taxable income exceeding this threshold is subject to a 9% Corporate Tax. Large multinational enterprises may be subject to separate rates under the OECD Pillar Two framework.
Certain entities and income categories qualify for exemptions under the Corporate Tax Law. These include businesses engaged in the extraction of natural resources, qualifying dividends and capital gains, and eligible intra-group transactions and business reorganizations that satisfy the prescribed conditions. Additionally, employment income, personal investment income, bank interest earned by individuals, and personal real estate investments generally remain outside the scope of Corporate Tax.
Businesses operating in the UAE should assess their Corporate Tax obligations, maintain proper financial records, and ensure compliance with the Federal Tax Authority (FTA) regulations. Early tax planning and the use of compliant accounting and ERP solutions can help organizations simplify Corporate Tax reporting, improve operational efficiency, and avoid penalties.
