Frequently Asked Questions

CT is a form of direct tax levied on the net income or profit of corporations and other businesses. CT is sometimes also referred to as “Corporate Income Tax” or “Business Profits Tax” in other jurisdictions.

All taxpayers, as prescribed by the Minister, will be required to register for UAE CT and obtain a Corporate Tax Registration Number. The Federal Tax Authority may also request certain Exempt Persons to register for UAE CT.
The following persons are exempt from UAE CT, either automatically or by way of application:

1. The UAE Federal and Emirate Governments and their departments, authorities and other public institutions;
2. Wholly Government-owned companies that carry out a mandated activity, and that are listed in a Cabinet Decision;
3. Businesses engaged in the extraction of UAE natural resources and related non-extractive activities that are subject to Emirate-level taxation after meeting certain conditions;
4. Public Benefit Entities that are listed in a Cabinet Decision;
5. Investment Funds that meet the prescribed conditions;
6. Public or private pension or social security funds that meet certain conditions; and
7. UAE juridical persons that are wholly-owned and controlled by certain exempted entities after meeting certain conditions.

We have created a Blog, with further information on who is exempt from corporate tax.
The term “Natural Person” in the UAE Corporate Tax Law [“CT Law”] means an individual. It refers to a living human being of any age, whether resident in the UAE or elsewhere. [ For minors and incapacitated individuals, it shall be their appointed Legal Representative]
A natural person shall be subject to UAE Corporate Tax in case they derive an annual Turnover exceeding AED 1 million from a ‘Business’ or ‘Business Activity’ in the UAE, as defined by the Corporate Tax Law and in Cabinet Decision No. 49 of 2023.
No. The Corporate Tax Law applies to natural persons that derive annual Turnover exceeding AED 1 million, regardless of their citizenship or visa status.
A “juridical person” is an entity established or otherwise recognised under the laws and regulations of the UAE, or under the laws of a foreign jurisdiction, that has a legal personality separate from its founders, owners and directors. Examples of UAE domestic juridical persons include a limited liability company, a foundation, an ‘onshore’ trust, a public or private joint stock company, and other entities that have separate legal personality under the applicable UAE ‘mainland’ legislation or Free Zone regulations.

UAE branches of a domestic or a foreign juridical person are regarded as an extension of their “parent” or “head office” and, therefore, are not considered separate juridical persons.
No, unless the foreign juridical person is “effectively managed and controlled” in the UAE and treated as a resident entity for UAE Corporate Tax purposes.
Yes, however, , dividends from domestic shareholdings will be exempt without condition, and dividends from foreign shareholdings and capital gains from domestic and foreign shareholdings will be exempt, subject to meeting the conditions of the Participation Exemption.
No, but natural persons who conduct a Business in the UAE through a sole proprietorship or civil company may be subject to Corporate Tax where a relevant Business or Business Activity is undertaken.
A competitive CT regime based on international best practices is expected to cement the UAE’s position as a leading global hub for business and investment and accelerate the UAE’s development and transformation to achieve its strategic objectives.

The UAE CT regime will become effective for financial years starting on or after 1 June 2023. 

Examples: 

  • A business that has a financial year starting on 1 July 2023 and ending on 30 June 2024 will become subject to UAE CT from 1 July 2023 (which is the beginning of the first financial year that starts on or after 1 June 2023) 
  • A business that has a financial year starting on 1 January 2023 and ending on 31 December 2023 will become subject to UAE CT from 1 January 2024 (which is the beginning of the first financial year that starts on or after 1 June 2023).
Taxpayers can electronically register for UAE CT through the Federal Tax Authority website. We have created a Blog detailing this process.
The taxable income for a Tax Period is the accounting net profit (or loss) of the business, after adjusting for certain items as defined in the Corporate Tax Law.
There is no registration threshold for UAE CT.

0% for Taxable Income up to and including AED 375,000. 

9% for Taxable Income exceeding AED 375,000

The Taxable Income for a Tax Period will be the accounting net profit (or loss) of the business, after making adjustments for certain items specified in the Corporate Tax Law and related implementing decisions.

The accounting net profit (or loss) of a business is the amount reported in its financial statements prepared in accordance with International Financial Reporting Standards (IFRS).

Adjustments to the accounting net profit (or loss) will need to be made for the following items:

  1. Unrealised gains and losses (subject to the election made regarding the application of the realisation principle);
  2. Exempt Income such as qualifying dividends and capital gains;
  3. Gains or losses arising on transfers within a Qualifying Group;
  4. Gains or losses arising on transfers arising from qualifying business restructuring transactions as per article (27) of the corporate tax law;
  5. Deductions which are not  allowable for Corporate Tax purposes;
  6. Transactions with Related Parties and Connected Persons;
  7. Transfers of Tax Losses within a group where the relevant conditions are met;
  8. Incentives or tax reliefs; and
  9. Any other adjustments as specified by the Minister.
In principle, all legitimate business expenses incurred to derive taxable income will be deductible, although the timing of the deduction may vary for different types of expenses and the accounting method applied. We have created a blog going into more detail on what are deductible and nondeductible expenses.
Yes. The UAE CT is a federal tax and will therefore apply across all the Emirates.
Yes. Taxpayers will be required to register for UAE CT (and update their details, if required), even if they are already registered for VAT.
UAE Corporate Tax does not apply on the salary and wages derived by employees in consideration for their services under an employment contract, including all allowances and bonuses.
Transfer pricing rules seek to ensure that transactions between Related Parties are carried out on arm’s length terms, as if the transaction was carried out between independent parties. To prevent the manipulation of taxable income, various articles in the Corporate Tax Law require that the consideration of transactions with Related Parties and Connected Persons needs to be determined by reference to their “Market Value”.
Yes. Transfer pricing rules apply to UAE businesses that have transactions with Related Parties and Connected Persons, regardless of whether the Related Parties or Connected Persons are in the UAE mainland, a Free Zone or a foreign jurisdiction.
The accounting net profit (or loss) would need to be adjusted for the items prescribed in the UAE Corporate Tax Law, including:

1. Unrealised gains/losses (subject to the election made regarding the application of the realisation principle);
2. Exempt income such as dividends;
3. Intra-group transfers;
4. Deductions which are not allowable for tax purposes;
5. Adjustments for transactions with Related Parties and Connected Persons;
6. Any incentives or tax reliefs; and
7. Any other adjustment specified by the Minister.
Dividends paid by UAE companies will not be deductible for CT purposes.

Where a business prepares their financial statements on an accruals basis, it has the following options in respect of the UAE CT treatment of unrealized accounting gains and losses:
●Option 1: The taxpayer can elect to recognize gains and losses on a ‘realization Basis’ for UAE CT purposes for all assets and liabilities – that is, any and all unrealized gains would not be taxable (and conversely, any and all unrealized losses would not be deductible) until they are realized; 
●Option 2: The taxpayer can elect to recognise gains and losses on a ‘realization basics’ for UAE CT purposes for assets and liabilities held on capital account only – that is, only unrealised gains and losses in respect of assets and liabilities held on capital account would not be taxable or deductible, respectively, until they are realised. Unrealised gains and losses arising from assets and liabilities held on revenue account, on the other hand, would continue to be included in taxable income on a current basis.  

Small Business Relief releases certain businesses from the obligation to calculate and pay Corporate Tax and from having to comply with the regular Corporate Tax reporting requirements. 

An eligible Taxable Person with Revenue of AED 3 million or below in the relevant Tax Period that ends on or before 31 December 2026 and prior Tax Periods can elect to be treated as having no Taxable Income in that Tax Period and will not have to calculate its Taxable Income or file a full Corporate Tax Return. 

For Tax Periods that end on or before 31 December 2026, any of the following UAE Resident Persons with Revenue of AED 3 million or below in the current and previous Tax Periods can claim Small Business Relief: 

  • A natural person. 
  • A legal entity that is neither: 

– a Constituent Company of a Multinational Enterprise Group as defined in Cabinet Decision No. 44 of 2020 that operates in more than one country and has a total consolidated group revenue of more than AED 3.15 billion in each financial period;
– nor a Qualifying Free Zone Person. 

If an eligible Taxable Person’s Revenue exceeds AED 3 million in any Tax Period, they will no longer be eligible for Small Business Relief for that Tax Period and any future Tax Periods.

The Free Zone Corporate Tax regime is a form of UAE Corporate Tax relief which enables Free Zone companies and branches that meet certain conditions to benefit from a preferential 0% Corporate Tax rate on income from qualifying activities and transactions.

Qualifying Activities are activities that can benefit from the Free Zone Corporate Tax regime regardless of whether the income is derived from transactions with another Free Zone Person, a Person in the mainland UAE, or from a foreign Person.

The Ministerial Decision No. 139 of 2023 Regarding Qualifying Activities and Excluded Activities specifies the following Qualifying Activities:

  • Manufacturing of goods or materials
  • Processing of goods or materials
  • Holding of shares and other securities
  • Ownership, management and operation of ships
  • Reinsurance services*
  • Fund management services*
  • Wealth and investment management services*
  • Headquarter services to Related Parties
  • Treasury and financing services to Related Parties
  • Financing and leasing of aircraft, including engines and rotables
  • Distribution of goods or materials in or from a Designated Zone
  • Logistics services

*subject to appropriate regulatory oversight of the competent authority in the UAE

Any ancillary activities performed by the Qualifying Free Zone Person that serve no independent function but that are necessary for the performance of a Qualifying Activity will also be considered a Qualifying Activity.

Except for shipping, wealth and asset management, and aircraft finance and leasing activities, income from Qualifying Activities would only benefit from the Free Zone Corporate Tax regime where the income is derived from a juridical person. This is because transactions with natural persons are considered an Excluded Activity.

The UAE has offshore company regimes where offshore companies can be set up in Ras Al Khaimah Economic Zone (RAKEZ) and Jebel Ali Free Zone (JAFZ). 

While as of the creation of this FAQ, the MoF CT FAQs do not address whether such offshore companies will be subject to UAE CT, we would expect them to be treated in line with general free zone entities. 

Offshore companies might be required to prepare audited FS. The audit requirement may vary depending on the details of the offshore regime.

All information on this page has been extracted from the Federal Tax Authority and Ministry of Economy official websites.

Nothing in these questions and answers should be interpreted as legal or tax advice, and it should not be assumed that the guidance is comprehensive or that it provides a definitive answer in every case. These questions and answers are not intended to address all aspects of the UAE CT regime and taxpayer specific circumstances should be considered when using these questions and answers for individual or business decisions.