The UAE, long known as a tax haven, has officially entered a new phase in its fiscal journey with the introduction of a federal corporate tax (CT) regime. This significant policy shift aligns the UAE with global tax standards, enhances transparency, and ensures economic sustainability—while still maintaining its investor-friendly environment.
Overview of UAE Corporate Tax
The Corporate Tax Law (Federal Decree-Law No. 47 of 2022) came into effect for financial years starting on or after 1 June 2023. It applies to most business entities operating in the UAE, including those in free zones, albeit with some exceptions and benefits.
Who Is Subject to Corporate Tax?
- UAE mainland companies
- Free zone entities (subject to specific conditions)
- Foreign companies with a permanent establishment (PE) in the UAE
- Natural persons (individuals) engaged in business or commercial activity, if income exceeds AED 1 million per year
Corporate Tax Rates in the UAE
| Taxable Income | CT Rate |
| Up to AED 375,000 | 0% |
| Above AED 375,000 | 9% |
| Multinationals (MNEs) with global turnover > EUR 750 million | 15% (as per OECD Pillar Two rules) |
This tiered system ensures that small businesses and startups continue to benefit from a zero-tax regime up to a threshold, while larger enterprises contribute proportionately.
FREE ZONE COMPANIES: QUALIFYING OR NOT?
Free zones enjoy a preferential CT regime provided they meet specific conditions, including:
- Maintaining adequate substance in the UAE
- Earning qualifying income
- Not electing to be subject to regular 9% CT
Qualifying income may include transactions with other free zone entities or foreign businesses, but mainland income is generally taxable.
Key Compliance Requirements
- Corporate Tax Registration
All taxable persons must register and obtain a Tax Registration Number (TRN) from the Federal Tax Authority (FTA). - Filing Corporate Tax Returns
Must be submitted within 9 months after the end of the financial year. - Financial Statements
Proper books of accounts are required. Certain entities must prepare and submit audited financials (especially free zone entities claiming 0% CT). - Transfer Pricing & Documentation
Businesses must comply with OECD transfer pricing rules and maintain documentation such as Local File and Master File, where applicable.
Final Thoughts
While the UAE’s introduction of corporate tax may seem like a big shift, it is still among the most competitive tax regimes globally. With proper planning and compliance, businesses can navigate the transition smoothly and continue to thrive in the region.
Now is the time to review your structure, assess your tax obligations, and ensure compliance. Partnering with a knowledgeable consultant can make all the difference.