Corporate Taxation in the UAE 2024: Everything You Need to Know

The United Arab Emirates (UAE) has emerged as a global business hub in recent years. The country has taken steps to diversify its economy beyond its traditional reliance on oil and gas and has created a business-friendly environment that attracts foreign investment and entrepreneurs.  Certainly, having a clear understanding of the corporate tax system in the UAE is crucial for any company operating in the country. In this comprehensive guide, we'll take a deep dive into corporate taxation in the UAE.

What is a Corporate Tax in UAE?

It’s a type of direct tax known as corporate tax is assessed on the net profit or income generated by corporations and other legal organizations.

The Rate of Corporate Tax in UAE

The CT rates according to the Ministry of Finance are:

• For taxable income up to AED 375,000, there is no tax.
• 9% of taxable income over AED 375,000 and
• Major multinationals that meet the requirements outlined in "Pillar Two" of the OECD Base Erosion and Profit Shifting Programme will be subject to a different tax rate (which has not yet been determined).

Who Should Pay Corporate Tax in UAE?

The CT will apply to:

1. All companies and individuals operating in the United Arab Emirates with a commercial license.
2. Free-zone enterprises (The UAE CT system will keep honoring the CT incentives now being provided to free-zone enterprises that abide by all legal criteria and don't have offices established on the country's land).
3. Only foreign organizations and people who regularly or continuously conduct trade or commerce in the UAE are permitted.
4. Banking activities.
5. Businesses involved in real estate management, development, construction, agency, and brokerage.

Income That is Exempt From Corporate Tax

Exemptions from the CT are as follows:

• Companies involved in the extraction of natural resources are free from CT because they will continue to be subject to the present corporate taxation at the Emirate level.
• CT won't apply to dividends or capital gains that a UAE business makes from its qualified shareholdings.
• If the requirements are met, qualifying intra-group transactions and reorganizations won't be subject to CT.

How is Corporate Tax Calculated in UAE?

In the United Arab Emirates, corporate tax is computed at 9% of the net profit shown in the company's financial statements. Only in the event that the taxable net profit exceeds 375,000 AED would the 9% corporate tax be applied. In other words, there is no tax on net profits up to 3,75,000 AED.

Corporate Tax in UAE Free Trade Zones

Free zones comply with all legal requirements while paying no corporate taxes in exchange; this also holds true for free zone businesses that conduct business with the mainland. Corporate taxes regulations may also apply to UAE residents and non-residents.

How to Pay Corporate Tax in UAE?

Corporate taxes must be paid annually in the United Arab Emirates (UAE), and understanding the payment processes is essential to avoid fines or other legal issues.

1. Calculate the corporate tax.
2. File the tax return with the Federal Tax Authority.
3. Make the payment online through the FTA's e-Services portal.
4. Keep detailed records of all tax payments.

You may want to learn more about: 

• UAE Income Tax Explained 2023: Everything You Need To Know.
• The Taxes And Fees For Buying A Property In UAE.
• A Comprehensive Guide To The VAT Rate In The UAE.

Edited by Imtilak Global ©

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