Introduction

The United Arab Emirates (UAE) has long been recognized as a global business hub due to its strategic location, investor-friendly policies, and tax-friendly environment. However, in line with its commitment to international taxation standards and economic development goals, the UAE introduced corporate tax (CT) under Federal Decree-Law No. 47 of 2022, which was later amended by Federal Decree-Law No. 60 of 2023. This law establishes a structured corporate taxation system, ensuring compliance with international best practices while maintaining the UAE’s business attractiveness.

The corporate tax regime officially came into effect on June 1, 2023, marking a significant shift in the country’s fiscal policy. This tax applies to businesses operating in the UAE, subject to specific exemptions and incentives aimed at fostering economic growth.

Daxin UAE (NOKAAF & Daxin Auditors), formerly known as NOKAAF Auditors, is a Registered Tax Agency in the UAE, authorized by the Federal Tax Authority (FTA)—the regulatory body overseeing tax administration. Mr. Noor Karim, Managing Director of Daxin UAE, is a Registered Tax Agent with the FTA, providing expert tax advisory and compliance services to businesses across various industries.

What is Corporate Tax?

Corporate tax is a direct tax imposed on the net income or profits of businesses. Unlike indirect taxes like VAT (Value Added Tax), corporate tax is levied directly on company earnings after deducting allowable expenses, deductions, and exemptions.

The UAE’s corporate tax regime is designed to:

• Ensure alignment with global tax standards.
• Prevent tax evasion and harmful tax practices.
• Enhance tax transparency and compliance.
• Support economic diversification and sustainability.

Corporate tax is applicable across various sectors, with specific exemptions and incentives to encourage investment in key industries.

Objectives of Corporate Tax in the UAE

The UAE government has introduced corporate tax with several key objectives in mind:

1. Strengthening the UAE’s Position as a Global Business Hub

By implementing corporate tax, the UAE aligns itself with international tax systems, ensuring credibility and attracting multinational corporations. Compliance with OECD guidelines enhances the country’s appeal as a trustworthy jurisdiction for global investments.

2. Accelerating Economic Growth and Development

Corporate tax revenue contributes to national development, funding infrastructure projects, healthcare, education, and public services. This structured taxation model ensures sustainable economic growth.

3. Enhancing Tax Transparency and Preventing Tax Avoidance

By adhering to global tax standards, the UAE ensures fair tax practices and discourages illicit financial activities such as money laundering and tax evasion.

4. Supporting Business Sustainability and Economic Diversification

With corporate tax incentives and exemptions for select industries, the UAE encourages investments in emerging sectors, fostering economic diversification beyond oil and gas.

Scope of Corporate Tax in the UAE

Corporate tax applies to various businesses operating in the UAE. The key categories subject to corporate tax include:

1. Mainland Businesses

All companies holding a commercial license in the UAE, regardless of their size or industry, are liable for corporate tax.

2. Free Zone Businesses

Free zone companies enjoy corporate tax incentives if they meet certain conditions, such as not conducting business in the UAE mainland. These companies must comply with the FTA’s regulatory requirements.

3. Foreign Entities and Individuals Conducting Business in the UAE

Foreign businesses and individuals engaged in ongoing commercial activities within the UAE are subject to corporate tax if their income meets the taxable threshold.

4. Banking Institutions

All banks operating in the UAE are liable for corporate tax, aligning with international tax frameworks that regulate the financial sector.

5. Businesses Engaged in Real Estate

Companies involved in real estate development, management, construction, brokerage, and agency services are taxable under the corporate tax regime.

Exemptions from Corporate Tax

Certain businesses and income categories are exempt from corporate tax, ensuring fairness and encouraging economic growth:

1. Natural Resource Extraction Businesses

Companies involved in oil, gas, and other natural resource extraction remain subject to Emirate-level taxation, exempt from federal corporate tax.

2. Dividends and Capital Gains

Dividends and capital gains earned by UAE businesses from qualifying shareholdings are exempt from corporate tax, promoting long-term investments.

3. Qualifying Intra-group Transactions and Reorganizations

Corporate mergers, acquisitions, and restructurings are not taxable, provided they meet the FTA’s eligibility criteria.

4. Personal Income and Investments

Corporate tax does not apply to individuals earning income through:

• Employment salaries and wages
• Interest from bank deposits
• Real estate investments (in a personal capacity)
• Dividends and securities ownership
• Foreign investment income

Corporate Tax Rates in the UAE

The corporate tax rates set by the UAE Ministry of Finance are structured to support business growth while ensuring fiscal responsibility:

• 0% Tax Rate: Applicable to taxable income up to AED 375,000, providing relief for startups and small businesses.
• 9% Tax Rate: Applies to taxable income exceeding AED 375,000.
• Special Tax Rate: A different tax rate (yet to be specified) applies to large multinational corporations under the OECD’s Pillar Two framework.

Corporate Tax Compliance and Filing Requirements

Businesses subject to corporate tax must comply with FTA regulations, including:

1. Registration with the Federal Tax Authority (FTA)

Companies must obtain a Tax Registration Number (TRN) and register for corporate tax through the FTA’s online portal.

2. Tax Filing Deadlines

Annual corporate tax returns must be filed within 9 months after the end of the financial year.

3. FTA Enforcement and Compliance

Non-compliance with corporate tax laws can result in penalties, fines, and potential legal action by the FTA.

Daxin UAE (NOKAAF & Daxin Auditors): Your Trusted Tax Advisory Partner

As a Registered Tax Agency in the UAE, Daxin UAE (NOKAAF & Daxin Auditors) specializes in corporate tax advisory and compliance services. Our Managing Director, Mr. Noor Karim, is a Registered Tax Agent with the FTA, ensuring expert guidance for businesses.

Our Services Include:

• Corporate tax registration and compliance
• Annual tax return filing
• Strategic tax planning and optimization
• FTA representation and dispute resolution
• Corporate restructuring and intra-group transaction advisory

Conclusion

The introduction of corporate tax in the UAE marks a transformative step towards a structured, transparent, and globally aligned taxation system. With 0% tax for SMEs and 9% tax for larger businesses, the framework supports economic diversification and sustainable growth.

For expert corporate tax consultation, compliance, and strategic tax planning, partner with Daxin UAE (NOKAAF & Daxin Auditors)—your Registered Tax Agency in the UAE.

📞 Contact us today for tailored corporate tax solutions!