Corporate Tax Services in the UAE

The UAE Corporate Tax rate is structured to encourage business growth. A 0% rate applies to taxable income up to AED 375,000, supporting startups and SMEs. Income above that is taxed at 9%, while large multinationals earning over AED 3127.5 million face a 15% Corporate Income Tax under OECD (Organisation for Economic Co-operation and Development) guidelines. The OECD works to create fair, transparent, and efficient international tax standards to combat tax avoidance and ensure that businesses pay their fair share.

In January 2022, the UAE Ministry of Finance introduced a Federal Corporate Tax, effective from June 1, 2023. This move supports the UAE’s commitment to global tax transparency and aims to curb harmful tax practices. The reform enhances the country's appeal as a secure hub for trade and investment.

With changing regulations, expert guidance is vital. Safe Ledger FZCO provides trusted Corporate Tax services in the UAE, ensuring compliance, mitigating risks, and enabling you to focus on business growth. Let Safe Ledger simplify your Corporate Tax journey.

Corporate Tax in the UAE is a federal direct tax imposed on the net income or profit of businesses, calculated after deducting allowable expenses. This represents a significant shift from the country’s traditionally tax-free environment and impacts financial planning and compliance for all businesses.

The corporate tax legislation in the UAE is outlined in Federal Decree-Law No. 47 of 2022 and its amendment, Decree-Law No. 60 of 2023. These regulations establish the foundation of the UAE's updated tax system, ensuring the country complies with global standards for tax transparency.

The introduction of Corporate Income tax in UAE aims not only to diversify government revenue but also to discourage harmful tax practices.

The Corporate Tax applies broadly across various entities within the country, signifying a comprehensive approach to taxation. Taxable persons include:

• UAE-incorporated legal persons: This category encompasses all entities legally established in the UAE, including those operating within its numerous Free Zones. Examples include Limited Liability Companies (LLCs), Public Joint Stock Companies (PJSCs), and foreign companies, like IBM Middle East.
• Natural Persons: Individuals become taxable if their business turnover exceeds AED 1 million annually. Salary, personal investments, and personal real estate are excluded.
• Foreign Juridical Persons: Tax applies if managed in the UAE, have a permanent establishment, or earn UAE-sourced income under Corporate Tax rules.
• Multinational Enterprises (MNEs): Large MNEs with consolidated global revenues exceeding AED 3127.5 million are specifically subject to the 15% Domestic Minimum Top-Up Tax (DMTT).

While the scope of the tax is broad, certain entities are exempt from Corporate Tax, provided they meet specific conditions:

• Government and government-controlled entities.
• Businesses are involved in extractive and non-extractive natural resources, such as: oil and gas, mining, agriculture, fisheries, and more.
• Qualifying investment funds, public benefit entities, and pension/social security funds.
• Certain income streams, such as dividends and capital gains earned from qualifying shareholdings.
• Profits are derived from qualifying intra-group transactions and reorganizations.

Free Zone entities in the UAE can access tax benefits, such as a 0% tax rate on qualifying income, but they must meet specific compliance requirements and register for Corporate Tax. In contrast, businesses outside Free Zones, including mainland companies, follow the general Corporate Tax laws, with no special exemptions. These businesses must comply with the standard tax rates and regulations, ensuring full tax registration and payment obligations are met.

Failing to meet the set conditions can lead to a 9% Corporate Tax on total income. This makes compliance critical for businesses.

The UAE Corporate Tax law introduces several key points designed to create a robust yet business-friendly tax environment. These provisions not only define the tax obligations but also offer various reliefs and incentives.

1. Tiered Tax Rates:

As previously outlined, the UAE Corporate Tax regime employs a tiered system to cater to different business scales.

Primary Considerations

• 0% for taxable income up to AED 375,000.
• 9% for taxable income exceeding AED 375,000.
• 15% for large MNEs with global revenues exceeding AED 3127.5 million, as a Domestic Minimum Top-Up Tax (DMTT).
• This applies only to MNEs within the scope of the Pillar Two Global Minimum Tax.

2. Small Business Relief (SBR):

From June 1, 2023, to December 31, 2026, the UAE offers tax relief to businesses with annual revenue under AED 3 million, allowing them to have no taxable income. This relief simplifies tax compliance and recordkeeping.

It's available only for UAE resident businesses, excluding Free Zone companies and multinational enterprise groups. To benefit, businesses must elect the relief annually through their corporate tax return.

Key points include:

• Applies to resident persons only.
• Revenue threshold: AED 3 million or less.
• Relief valid through 2026.
• Significantly reduces compliance burden.
• Businesses must not be part of a multinational group or a Qualifying Free Zone Person, as both are excluded from SBR.

4. Participation Exemption:

To avoid double taxation and encourage international investment, the UAE exempts dividends and profit distributions from qualifying shareholdings.

Requirements for exemption:

• Minimum 5% ownership or AED 4 million acquisition cost.
• Shares held for at least 12 months.
• Foreign entity subject to tax at ≥9%.
• Applies to domestic and foreign investments.

5. Loss Set-Off:

UAE Corporate Tax Law allows businesses to offset tax losses against future income. This provides long-term tax efficiency and financial flexibility.

Important considerations:

• Offset capped at 75% of taxable income per period.
• Losses may be carried forward indefinitely.
• Cannot apply losses retroactively.
• Accurate records and business continuity are essential.

6. Tax Grouping:

Groups of UAE-resident companies may consolidate under one tax return, treated as a single taxable entity. This simplifies Corporate Tax filings.

Eligibility criteria:

• Parent owns ≥95% of share capital, voting rights, and net assets.
• All entities must be UAE tax residents.
• The group must elect to be treated as one entity.
• One consolidated return for the group.

7. Foreign Tax Credits:

To prevent double taxation, UAE businesses can claim credits for foreign taxes paid on income also taxed in the UAE.

Key details:

• Credit applies only to the same income taxed abroad.
• Capped at the UAE Corporate Tax due on that income.
• Must provide documentation of foreign tax paid.
• Ensures the total tax burden is not duplicated.

Complying with UAE Corporate Tax starts with mandatory registration and continues through annual tax return filing. All taxable persons, regardless of expected tax liability, must register with the Federal Tax Authority (FTA).

Registration takes place exclusively online through the EmaraTax portal.

Steps to Register:

• Register With the Official Platform:

  • Businesses must first register with the Federal Tax Authority (FTA) via the EmaraTax portal.
  • Required documents include the trade license, Emirates ID or passport copy, and proof of authorization for the signatory.

• Maintain Accurate Records:

  • Keep proper records of financial transactions, income, expenses, and deductions.
  • Ensure all data is compliant with accounting standards such as IFRS (International Financial Reporting Standards).

• Prepare Financial Statements:

  • Prepare the company’s annual financial statements, including profit and loss, balance sheets, and other necessary documents, ideally audited and compliant with IFRS.

• File Your Tax Return:

  • Use the EmaraTax portal to file your Corporate Tax return, typically within nine months of the financial year-end.
  • Include accurate information about taxable income, allowable deductions, and any tax exemptions.

• Pay Your Tax:

  • Pay any taxes owed within the same deadline to avoid penalties and interest.
  • Taxes are calculated at a 0% rate for income up to AED 375,000, and 9% for income above that threshold.

• Submit and Confirm:

  • Once the return is submitted, ensure all data is complete and accurate.
  • The FTA may review the submitted return and issue a tax assessment.

• Review and Appeal (if necessary):

  • If there are discrepancies or if you disagree with the tax assessment, you can file an appeal with the FTA.

The filing process ensures transparency, and by adhering to deadlines and regulations, businesses can avoid penalties and ensure smooth operations under the UAE's corporate tax framework.

Proper documentation is a cornerstone of Corporate Tax compliance in the UAE, both for initial registration and ongoing filing. The specific documents required depend on the applicant's legal structure.

For Natural Persons:

If an individual is conducting business and needs to register for Corporate Tax, the following documents are typically required:

• Trade license (if applicable).
• Emirates ID or Passport of the applicant.

For Legal Persons:

For companies and other legal entities, the required documents for registration include:

• Trade license.
• Emirates ID or Passport of the authorized signatory.
• Proof of authorization for the authorized signatory.

General Documents for Filing (Beyond Registration):

When preparing and filing the annual Corporate Tax return, businesses will need to provide detailed financial records and other supporting documentation. These include:

• Invoices (both sales and purchase).
• Agreements and contracts relevant to business operations.
• Comprehensive financial statements, such as profit and loss statements, balance sheets, and cash flow statements.
• Bank statements to verify financial transactions.
• Payroll records detailing employee compensation.
• Receipts and payment vouchers for all transactions.
• Transfer pricing documentation, if applicable, to substantiate arm's length transactions with related parties.

Staying compliant with Corporate Tax in UAE involves more than just registration and filing. Businesses must meet ongoing legal and financial requirements to avoid penalties and maintain credibility.

Accurate Financial Records: A Legal Obligation

Under the UAE Corporate Tax Law, every registered entity must maintain complete and accurate records of all business transactions. This includes:

• Income and revenue streams
• Operating expenses
• Assets and liabilities
• Payroll and inventory

These records form the basis for calculating Corporate income tax, with the starting point being the net profit or loss as per audited financial statements (e.g., typically prepared under International Financial Reporting Standards (IFRS).

Transfer Pricing Rules: Stay Aligned

Transactions with related parties or connected persons must be conducted fairly to avoid profit manipulation. Businesses are required to:

• Justify internal pricing
• Maintain transfer pricing documentation
• File disclosure forms (if thresholds are met)

These practices align the UAE with international standards and support transparency in Corporate Tax data reporting.

Record Retention: 7-Year Rule

All tax-related documents must be preserved for up to 7 years. This includes:

• Tax returns
• Accounting records
• Supporting documents for deductions or exemptions

All Corporate Tax returns must be submitted online via the EmaraTax portal. Businesses must accurately input financial and non-financial data, ensuring the return reflects taxable income after expenses and exemptions.

1Tax Period and Filing Deadline

Your tax period usually matches your financial year, either the Gregorian calendar year or another 12 months. You must file your tax return and pay any Corporate Tax due within nine months after the end of your tax period.

For example, if your financial year ends on December 31, 2024, the filing deadline will be September 30, 2025. Timely filing helps you avoid penalties and fines.

Important Filing Details:

• Only one consolidated tax return is required per tax period.
• There is no requirement for advance or estimated payments; tax is paid when filing the return.
• Accurate calculation of taxable income is essential, taking into account all eligible deductions and exemptions.
• Businesses can use a Corporation tax calculator to estimate their tax liability before filing.

2. Getting Professional Help

Navigating the filing process can be complex. Consulting a Corporate Tax specialist or using a Corporate Tax return guide can help ensure compliance, reduce errors, and avoid penalties. Professional advice is valuable, especially for first-time filers or companies with complex financials.

Adhering to Corporate Tax registration deadlines in the UAE is crucial for businesses. Missing these deadlines can lead to significant penalties. The specific registration timeline varies based on the entity type.

Penalties for Non-Compliance

Late registration or filing can incur substantial penalties:

• Late Tax Registration: A fine of AED 10,000 applies.
• Late Filing of Tax Return: A penalty of AED 500 per month for the first 12 months, increasing to AED 1,000 per month thereafter.
• Late Tax Payment: An annual interest of 14% on unpaid taxes, calculated monthly.

Temporary Penalty Waiver Initiative (April 2025)

The FTA introduced a temporary initiative in April 2025 to support businesses. This allows businesses to avoid the AED 10,000 late registration fine if they meet specific conditions:

• Condition: Businesses must register and submit their Corporate Tax return within seven months from the end of their first tax period.
• Benefit: This waiver encourages timely compliance and provides financial relief during the transition phase. Even if penalties were already paid, eligible businesses may receive a refund.

Can You Pay Corporate Tax in Instalments?

Businesses in the UAE can pay their corporate tax in instalments. The Federal Tax Authority (FTA) allows taxpayers to apply for a payment plan if they meet certain conditions. Instalment payments are generally available for large businesses or those facing financial hardship, allowing them to spread their tax liability over a set period. To request this option, businesses must apply through the FTA's EmaraTax portal for approval.

Once registered, businesses must meet several ongoing obligations:

1. File Annual Corporate Tax Returns: Every taxable person must file a Corporate Tax return each year, regardless of whether they owe tax.
2. Maintain Accurate Financial Records: You must keep full financial statements, ledgers, and supporting documents. These records form the basis of your tax calculations.
3. Follow Transfer Pricing Rules: Ensure related-party transactions are done at arm’s length to prevent profit shifting. Supporting documents must be ready if requested by the FTA.
4. Retain Records for 7 Years: Keep all tax-related records, financial statements, and filings for up to 7 years for audit and compliance checks.

Filing Corporate Tax in the UAE offers substantial advantages for businesses.

1Avoiding Penalties and Legal Issues

Accurate and timely tax filing is crucial. The UAE government has a strict zero-tolerance policy against tax evasion. Non-compliance can result in:

• Hefty fines: Financial penalties can significantly impact your bottom line.
• Legal action: Businesses may face court proceedings.
• Suspension of business licenses: This can halt operations entirely.

2. Maximizing Tax Benefits

The UAE Corporate Tax regime offers various incentives. Proper tax filing allows businesses to maximize these benefits:

• Small Business Relief: Provides temporary relief for eligible smaller entities, offering a tax exemption on the first AED 375,000 of taxable income.
• Participation Exemption: Exempts certain dividends and profit distributions from tax.
• Loss Set-Off: Allows businesses to offset tax losses against future taxable income.
• Foreign Tax Credits: Mitigate double taxation for income earned abroad.

Accurately accounting for expenses and deductions can lower taxable income. For example, qualifying Free Zone entities can benefit from a 0% tax rate on qualifying income. Proactive tax planning ensures businesses leverage these provisions effectively.

3. Building Trust and Credibility

Consistent and correct tax filings are vital for building trust. In today's global market, financial transparency is paramount. Regular and accurate tax filings demonstrate:

• Commitment to legal compliance: Shows adherence to the law.
• Responsible financial management: Highlights sound financial practices.

This transparency is crucial for attracting investment. It also establishes credibility in the market, strengthening a business's overall standing and fostering long-term sustainability.