Corporate Tax UAE (CT)

In January 2022 the Ministry of Finance announced it will introduce federal corporate tax (CT) to net profits of business. Taxes will be imposed on businesses either 1 June 2023 or 1 January 2024 depending on their financial year. The CT will apply to all emirates.

What is Corporate Tax? (CT)

Corporate tax is a form of direct tax levied on the net income or profit of corporations and other entities from their business.  

Corporate Tax Rate?

As per the Ministry of Finance CT rates are :

Taxable Person	Rate of Corporate Tax
Both natural persons and legal persons	Taxable income up to AED 375,000 is tax-free. Taxable income exceeding AED 375,000 is subject to 9%
Qualifications for Free Zone Personnel (see section H - 'Free Zone)	No Tax on Qualifying income Cabinet Decision No. Cabinet Decision No. 55 of 2023.

CT will apply to:

• All businesses and individuals in the UAE who are conducting commercial activities with a license
• Free zone businesses (The UAE CT régime will continue to honor the CT incentives that are currently offered to businesses in free zones that meet all regulatory requirements and do not have business established on the UAE mainland.
• Foreign individuals and entities are only allowed to conduct business or trade in the UAE on a regular or ongoing basis.
• Banking operations.
• Real estate agents, developers, builders, and managers who are involved in the management, development, construction, or brokerage of real estate.

Exemptions from CT:

The following Persons are exempted automatically from UAE corporate tax:

• The UAE Federal and Emirate Governments and all their departments, agencies, and other public institutions
• Companies that are owned and controlled entirely by a Government Entity that carry out a Mandated Activity and which are listed in a cabinet decision;
• Taxation at the Emirate level applies to businesses engaged in extracting UAE Natural Resources, or other non-extractive activities related to these extraction activities; provided that certain conditions are met.

The following persons are exempt from UAE corporate tax upon approval of a request submitted to the Federal Tax Authority.

• Qualifying Investment Funds which meet the prescribed criteria;
• 115 of 2023; and public or private pension or social insurance funds that meet the requirements specified in Ministerial decision No. The Ministerial Decision No. 115 of 2023 specifies the conditions for public or private pension funds and social security funds that meet these requirements.
• The UAE legal persons who are owned and controlled in their entirety by exempt entities and engage in activities that are specified in paragraph (h), Clause 1 of Article 4, Corporate Tax Law.

Additionally, CT will not apply to:

• Individual earnings, such as salaries and other employment income received by individuals in the public or private sector.
• Interest and other income that an individual earns from savings or bank accounts.
• Dividends, capital gains, and interest earned by a foreign investor.
• Individuals investing in real estate in their capacity.
• Dividends, capital gains, and other income that individuals earn from holding shares or securities in their capacity.

When is the UAE Corporate Tax regime effective?

The UAE Corporate tax regime will be in effect for all financial years beginning on or after June 1, 2023. Examples:

• The UAE Corporate Tax will apply to a business that has a Financial Year beginning on 1 July 2020 and ending on 30 June 2024. This is because the Financial Year begins on or after 1 June 2023.
• Businesses with a Financial Year beginning on 1 January 2020 and ending on 31 December 2020 will be subject to UAE corporate tax from 1 January 2030 (which is when the first Financial Year begins on or after 1 June 2023).