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Essential insights for businesses on UAE’s corporate tax implementation

Partner and Head of Tax, Shamma Al Falahi recently spoke with Finance Middle East regarding the tax landscape in the UAE. 

The introduction of corporate tax in the United Arab Emirates (UAE) marks a significant shift in the region's tax landscape. The Corporate Tax Law, effective for financial years starting on or after June 1, 2023, establishes the framework for the imposition of a federal corporate tax in the UAE. Business must now adapt to the new tax requirements, including understanding the various exemptions, reliefs, tax rates, and reporting obligations. This article will provide a comprehensive overview of the important components of the Corporate Tax Law regime in the UAE. 

Difference between taxable person and taxable income

'Taxable Person' can be a juridical Person or a natural Person. A juridical Person is legal person who carries on business or business activity and has a separate legal existence. A natural person is an individual who carries on Business or Business Activity in the UAE and his/her total turnover derived from business or business activities exceeds AED 1 million within the calendar year (Jan to Dec).

‘Taxable Income’ is the income subject to tax, generally its the net profit of businesses with some exceptions and nuances. Taxable income consists of all revenue generated by any natural or juridical person less: Any unrealized gain or loss and Exempt income; Reliefs; and Deductions. It is important for Natural person to note that income derived from: wages, personal investment income, and real estate investment is disregarded when determining the taxable income.

Tax rates and thresholds

The corporate tax regime in the UAE features a standard rate of 9% on taxable income exceeding AED 375,000 (approximately $100,000), for taxable income below the threshold of AED 375,000, a rate of 0% applies. With regards to Qualifying Free Zone Persons, it is subject to 0% on Qualifying Income and 9% on Non-Qualifying Income.

This threshold aims to support small and medium-sized enterprises (SMEs) by exempting them from the higher tax rate. As this rate is among the lowest in the Gulf Cooperation Council (GCC) region, with Bahrain being the only exception as it does not impose a general corporate tax. This decision reflects the UAE's commitment to fostering a business-friendly environment and supporting startups and smaller businesses.


We must highlight that the Corporate Tax regime in the UAE provides Reliefs that a business can benefit from, Qualifying Free Zone Persons would not qualify to benefit from, which are Transfer within Qualifying Group, Business Restructuring Relief, Tax Loss Relief and Small Business Relief.

Compliance Requirements
To facilitate understanding and compliance with the new tax regime, the UAE Ministry of Finance and the Federal Tax Authority have provided guidelines and resources to assist businesses in navigating the new tax environment. These include explanatory to the Corporate Tax (CT) Law. It is important for a taxable person to understand its obligation with regards to Registration, Filling and De-registration. A Taxable Persons should register for Corporate Tax with the Federal Tax Authority and obtain a Tax Registration Number for Corporate Tax prior to the deadline of filling their Tax Returns. The timeline for the Filling is Nine Months from the end of the relevant Tax Period. If a Corporate Tax registered Person ceases to be a Taxable Person for any reason, they should file a Tax Deregistration application with the FTA within 3 months of the date the entity ceases to exist, cessation of the Business, dissolution, liquidation.

Aligning with international tax standards
The implementation of corporate tax in the UAE reflects a broader global trend towards more uniform corporate taxation and to aligns with international tax standards.

The introduction of corporate tax requires robust compliance mechanisms. Businesses must adapt to new reporting requirements, maintain adequate financial records, and understand their tax liabilities. The new tax regime will impact how businesses in the UAE structure their operations and finances. Business will need to consider tax implications in their decision-making processes. 

While the tax may increase operational costs for some businesses, the competitive rate is likely to maintain the UAE's attractiveness as a global business hub.

Read the full article, as published here: Essential insights for businesses on UAE’s corporate tax implementation.

This article was written by tax lawyer Shamma Al Falahi and focuses on UAE Corporate Tax.

BSA is a regional Law Firm in the Middle East with offices in the UAE, Oman and Saudi Arabia. As a full-service law firm our practice areas include litigation, arbitration and corporate services, including M&A, banking & finance, Intellectual Property, TMT, Fintech, employment and insurance.

Published on 18 January, 2024.

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