Corporate Tax Guide for UAE Businesses

What is Corporate Tax?

Corporate Tax is a direct tax levied on the taxable income of corporations and other businesses. It's also known as Corporate Income Tax or Business Profits Tax in other places.


In the UAE, Corporate Tax applies to companies, certain partnerships, unincorporated entities, and even natural persons conducting business activities.

How Does Corporate Tax Work?

Corporate tax is calculated based on your taxable income, which is your accounting income adjusted for tax purposes.


Here's how it generally breaks down:
 - 0% on the first AED 375,000 of taxable income.
 - 9% on taxable income exceeding AED 375,000.

Corporate Tax UAE Calculations - Corporate Tax Rate

Example: Calculating Corporate Tax

Let’s look at a real-life example to make this clearer.

Example: Company A LLC

  - Revenue: AED 8 million
  - Expenses: AED 2 million
  - Net Profit: AED 6 million
Company A LLC’s taxable income is the net profit after adjustments, which in this case remains AED 6 million.

Here’s the tax calculation:
 - 0% Tax Rate: AED 375,000 x 0% = AED 0
 - 9% Tax Rate: (AED 6,000,000 - AED 375,000) x 9% = AED 506,250
So, Company A LLC’s corporate tax liability for the tax period is AED 506,250.
Corporate Tax Calculation - UAE using the Corporate Tax rate

Who Needs to Pay Corporate Tax in UAE?

In the UAE, Corporate Tax is applicable to various entities and individuals conducting business activities within the country.

  1. Juridical Persons (Corporations)
    - Incorporated in the UAE or managed and controlled in the UAE.

    - Includes UAE branches of domestic or foreign entities.

   2. Non-Resident Juridical Persons
    - Foreign entities with a Permanent Establishment in the UAE.   
    - Entities earning income from UAE immovable property or State Sourced Income.

   3. Natural Persons (Individuals)
    - Conducting business activities in the UAE with a turnover exceeding AED 1,000,000 per year.
    - Includes sole establishments and individual partners in unincorporated partnerships.

   4. Free Zone Persons   
    - Free Zone entities meeting specific conditions can be taxed at 0% on Qualifying Income.

Exempt Persons
Includes government entities, public benefit entities, certain natural resource businesses, and pension/social security funds.
Must meet specific conditions to maintain exempt status
Who Should Pay Corporate Tax in UAE, Dubai

When is Corporate Tax Due?

Corporate tax is paid annually based on your financial year, with the tax return due within nine months from the end of this period.
Payment of any due tax must also be made within these nine months.

Key Takeaways

  1. Definition of Corporate Tax: A tax on the taxable income of businesses, including companies, partnerships, and individuals conducting business in the UAE.

  2. Corporate Tax Rates: 0% on the first AED 375,000 of taxable income, and 9% on income exceeding AED 375,000.
  3. Who Pays Corporate Tax: Applies to all companies and legal entities, as well as individuals engaged in business activities.
  4. Tax Payment and Filing: Annual tax returns and payments are due within nine months from the end of the tax period.

How Fastlane can help?

 - Comprehensive Tax Planning: Fastlane ensures all entities, from corporations to individuals, comply with UAE Corporate tax laws, minimizing liabilities through expert tax planning and strategic advice.

 - Accurate Tax Return Filing: Fastlane handles the annual tax return preparation and filing process, ensuring timely and accurate submissions within the nine-month deadline to avoid penalties.

 - Expert Compliance Support: Fastlane provides ongoing support to maintain compliance with UAE Corporate Tax regulations, including managing documentation and meeting specific conditions for exemptions.
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