UAE Corporate Tax is not simply "profit × 9%". The Taxable Income figure is the result of a precise series of adjustments to accounting profit — and each adjustment must be applied in the correct order. Apply losses before adding back non-deductibles, or apply the wrong interest article first, and you get a different answer.
The FTA and the exam both test sequence knowledge — not just knowledge of what adjustments exist.
Step 1: Accounting Income (from Financial Statements)
Step 2: Less Exempt Income (Art 22–25)
Step 3: Add Non-Deductible Expenditure (Art 30–36)
Step 4: Less Tax Losses (Art 37 — 75% cap)
Step 5: = Taxable Income
Step 6: × CT Rate (0% / 9%)
Step 7: Less FTC → CT Payable
Starting point
Taken directly from the audited or management accounts — the profit before CT. Prepared under IFRS or other accepted accounting standards. This is the starting point, not the ending point.
Interest expense, entertainment, depreciation, provisions — all embedded in this number before CT adjustments begin. Do not adjust accounting income itself; adjust from it.
Articles 22–25 — deducted first
Always exempt. No Participation Interest tests. If a dividend is received from any UAE Resident Juridical Person, it is fully exempt — period. The most frequently tested exemption.
Exempt if Participation Interest conditions met: ≥5% ownership, held ≥12 months, the foreign company is subject to ≥9% tax in its home jurisdiction, and the investment is not primarily held for tax avoidance. Note: if the foreign company is an expense in the payer's books, this overrides the Participation Exemption test.
Gains on disposal of a qualifying Participating Interest are exempt. Same ownership/holding conditions as Article 22(2). Subject to the rental income carve-out — gains attributable to UAE immovable property excluded from exemption.
A Taxable Person may elect to exclude Foreign PE income from UAE CT. If the election is made, foreign PE income is excluded from Taxable Income — but no FTC is available for foreign tax paid on that income (Election A). If no election, Foreign PE income is included and FTC applies (Election B).
Income from international transportation of passengers and goods exempt. Applies to shipping and air transport companies meeting the Article 25 conditions.
Accounting Income minus all exempt income items
Articles 30–36 — add back to income
50% of entertainment, amusement, and recreation expenses are non-deductible. The accounting profit already shows the full deduction; add back 50% of the entertainment line.
Add back 100% of: regulatory fines and penalties; donations to non-Qualifying Public Benefit Entities; dividends paid; bribes and illicit payments; recoverable VAT. These were deducted in accounting profit but are never deductible for CT.
Three separate interest limitation rules apply. They must be applied in this specific sequence. See the Interest Ordering section below for full detail.
Transactions with connected persons must be at arm's length. Any excess expenditure paid to a connected person above the market rate is disallowed and added back. Also applies to related parties under transfer pricing.
Income after exemptions plus all non-deductible expenditure added back
Article 37 — capped at 75% of Taxable Income
Tax losses from prior financial years may be carried forward indefinitely to offset future Taxable Income — subject to the 75% cap. Note: losses can only be carried forward if the Taxable Person (or group of companies) has 50% common ownership continuity.
Tax losses cannot reduce Taxable Income by more than 75% of Taxable Income before the loss deduction (i.e., Step 4 starts from the adjusted figure after Steps 2 and 3). At least 25% of the adjusted income is always taxable, regardless of how large the loss pool is.
If the Taxable Person is under Small Business Relief (SBR — revenue below AED 3M), any tax losses that arise under SBR cannot be carried forward to a future non-SBR period. They are permanently lost.
If adjusted income = AED 1,000,000 and carried-forward losses = AED 900,000:
Max deductible = AED 750,000 (75%). Remaining AED 150,000 is Taxable Income.
Unused AED 150,000 of losses carry forward to next period.
Steps 1 – 2 + 3 – 4
Taxable Income = Accounting Income − Exempt Income + Non-Deductible Expenditure − Tax Losses (capped at 75%). This is the figure CT rates are applied to. Do not apply rates to Accounting Income directly.
0% / 9% — AED 375,000 threshold
Zero rate on all Taxable Income up to AED 375,000. Applies to the first AED 375K regardless of total income level.
9% rate on all Taxable Income exceeding AED 375,000. The 0% band is not lost when you cross the threshold.
Qualifying Free Zone Persons (QFZP) use different rates: 0% on Qualifying Income, 9% on non-Qualifying Income. The AED 375,000 small business band does NOT apply to QFZPs.
CT Liability → CT Payable
Where foreign income is included in UAE Taxable Income (not excluded under Art 24 election), any foreign tax paid on that income is credited against UAE CT Liability. The credit cannot exceed the UAE CT attributable to that income — it reduces the UAE CT bill but cannot create a refund.
Withholding tax deducted at source in foreign jurisdictions on UAE-sourced income may also be creditable, subject to double tax treaties and the CT law conditions.
The amount actually remitted to the FTA. This is the final answer.
Three separate Articles limit the deductibility of interest. The order in which you apply them is fixed and non-negotiable. Getting this wrong is a common exam error and a real-world compliance trap.
General Interest Deduction Limitation
Cap: 30% of EBITDA
Floor: AED 12M (always deductible up to this amount)
Banks, Insurance, Infrastructure exempt from Art 34
Specific Limitation — Connected Persons
Interest paid to connected persons / related parties where specific conditions apply
After Art 34 disallowance already determined
Transfer Pricing Adjustment
Arm's length pricing on interest — disallow above market rate
Applied to remaining deductible interest after Art 34 + 31
Article 34 disallows a portion of total interest first. Articles 31 and 30 then operate on the remaining interest that Article 34 allowed. If you apply Article 30 before Article 34, you are applying transfer pricing adjustments to a different (larger) base, producing a different disallowance figure. The sequence is part of the law — it cannot be reordered.
• EBITDA cap = 30% of Adjusted EBITDA for the tax period
• AED 12M floor = interest up to AED 12M is always fully deductible (whichever is higher: 30% EBITDA or AED 12M)
• Disallowed interest under Art 34 can be carried forward 10 years
• Banks, Insurance Companies, and Infrastructure Projects are exempt from Art 34
Accounting Income ± exempt income ± non-deductibles − losses. Do NOT apply the 9% rate. Do NOT deduct FTC.
Taxable Income × CT rate (0%/9%). This is the tax before credits. Do NOT deduct FTC yet.
CT Liability minus Foreign Tax Credits (Article 47) and any WHT credits. This is what goes to the FTA.
The following example traces a company through all 7 steps with real numbers to demonstrate the sequence in practice.
Mainland UAE company | First year of operations | AED figures
The single most common error: taking net profit from the financial statements and multiplying directly by 9%. You must work through Steps 2–4 first. The exemptions and add-backs can move Taxable Income significantly from accounting profit.
Tax losses (Step 4) are deducted from the adjusted income after non-deductibles (Step 3) have been added back. If you deduct losses first and then add back non-deductibles, the 75% cap is calculated against the wrong base — and you may also allow more loss relief than is actually permitted.
Applying Article 30 or 31 before Article 34 produces a different disallowance figure. Article 34 is always first — it disallows a portion of the total interest pool, and Articles 31 and 30 then operate on what remains. Sequence: 34 → 31 → 30, always.
FTC (Article 47) is deducted from CT Liability to arrive at CT Payable. It is not applied during the Taxable Income calculation. If the question asks to "calculate CT Liability", stop before the FTC deduction. Premature FTC application gives a wrong CT Liability answer.
The 0%/9% threshold with the AED 375,000 free band applies to mainland and non-QFZP entities. A Qualifying Free Zone Person pays 0% on Qualifying Income and 9% on non-Qualifying Income — the AED 375,000 band does not apply to them.
Fastlane is an FTA-registered Tax Agent (TRN: 104218042400003). We prepare the full CT computation, review exempt income and non-deductible add-backs, apply the correct interest disallowance sequence, and file your Corporate Tax return with the FTA.
View UAE CT Filing Packages →This article is based on the UAE Corporate Tax Law (Federal Decree-Law No. 47 of 2022), FTA guidance, and Ministerial Decisions. Fastlane is an FTA-registered Tax Agent advising UAE mainland and free zone businesses on CT computation, registration, filing, and compliance. All computations should be prepared or reviewed by a qualified UAE CT advisor.