Corporate tax in the UAE: Everything You Need to Know

As at June 2023, the United Arab Emirates had already introduced a federal corporate tax of a standard rate of 9% in its endeavor to shift from the earlier stance of ‘no corporate tax’. Its intention is standardization of UAE tax laws so that it stands on par with the rest of the global best practices by offering a structured framework to do business in the region. As of January 2025, DMTT continues to be a feature that is designed to mold the corporate tax landscape for large multinational companies. The article decomposes what all these changes mean for businesses in the UAE.
UAE Corporate Tax: Overview
This is a new taxation regime; it is in such a manner that it imposes the lowest compliance cost on businesses that is transparent and accountable. The corporate tax domain had some important announcements prior to the introduction of this, like guidelines for the preparation of financial statements and specific exemptions.
All corporate business activities from June 1, 2023 will attract corporate tax. Profit is expected to be reported according to accounting standards accepted globally. The Federal Tax Authority controls the implementation and collection.
Important corporate tax updates for 2024
Integration with UAE Pass App
You can now access the FTA portal only through the UAE Pass app linked to your Emirates ID. This further enhances security to the point that no tax-related activities – from VAT to refunding taxes in case of a lost device or malfunctioning application – can be accessed without various requirements placed on the tax activities. Registration for Corporate Tax has been streamlined.
Registration of Corporate Tax has become easier now. Before, a business had to file a new formation document for registration. The FTA has rectified the situation and done away with the preliminary step so that registration can be hastened.
Procedure for Deregistration
There is a new rule about closing shop for businesses. Businesses must file a tax return for the period of their operation and then deregister from the corporate tax system.
New Payment Option: GIBAN
The UAE had already issued GIBANs for corporate tax purposes but not of the same type as those that had been issued for VAT. Businesses will receive notification stating the new GIBAN details to be used for all corporate tax payments.
Who is Liable to Corporate Tax?
Corporate tax is applicable on
Business and individuals carrying out business activities under a valid commercial license.
Free zone enterprises that may also be eligible for specific tax reliefs.
Ordinary trade carried on by foreigners in the United Arab Emirates.
Banking, real estate, and construction businesses.
Impact on Free Zone Businesses
Free zone companies are liable for the corporate tax regime and administrative requirements. A Qualifying Free Zone Person is qualified to pay a zero percent corporate tax rate on qualifying activities. However, revenue outside of qualifying activities or that exceeds 5% of total revenue or AED 5 million will attract a standard rate of 9%.
Penalties for Non-Compliance
Failure to observe tax laws incurs massive fines in case of a business as follows:
First non-compliance violation of record keeping: AED 10,000; consecutive offenses: AED 20,000.
Submission of papers not in Arabic: AED 5,000.
Month after month if the tax returns are not submitted or taxes paid: increases subsequently.
Tax rate and exemptions:
Profits up to AED 375,000 are taxed at 0%, and the standard corporate tax rate is 9%. The tiered system is designed to encourage small businesses and startups. Companies subject only to corporate tax must have a turnover exceeding AED 1 million in a calendar year.
Some of these firms, mostly extractive industries firms and local governments, are exempted from corporate tax while the dividends and capital gains arising from qualifying shareholdings are exempted from taxes.
DMTT
There is a domestic minimum top-up tax in this tax law.
Beginning January 1, 2025, large multinational enterprises (MNEs) will be taxed on profits with consolidated global revenues of $793 million or more with a minimum tax rate of 15%. This measure has been in alignment with the OECD’s Base Erosion and Profit Shifting Project (BEPS) to offset the impact of globalization and digitalization.
Conclusion
Once the United Arab Emirates adopts corporate tax, business needs to get familiar with the new tax regulations and compliance requirements. That does not change the fact that the UAE is an attractive destination for entrepreneurs, but the understanding of implications of corporate tax is important for good financial decisions. The recent changes are trying to bring more transparency into taxes and bring the UAE in line with international standards, paving a way for sustainable economic growth. An established entrepreneur who wants to extend or build a business in the UAE will have to keep up with the changes in tax rules for long-term success.
FAQs
Will Individuals Be Taxed?
A corporate tax on companies that function within the United Arab Emirates if their turnover passes AED 1 million while employment, real estate, and investment returns will be not taxable without licensing.
Do Withholding Taxes Apply?
There will be no with-holding taxes levied both locally and cross border to allow a foreign investor, pay only at source for activities operated in the United Arab Emirates.
Are Companies Allowed to Register as a Single Tax Entity?
Yes, the UAE corporate tax law also allows for loss utilization rules where companies are allowed to be registered as a single tax entity and apply for relief as a group.