Understanding Corporate Tax in the UAE: A Comprehensive Guide

Catnyx Consultants
May 1
4 min read

The United Arab Emirates (UAE) has taken a landmark step by introducing a corporate tax regime, bringing its fiscal system in line with global tax standards. Known for its investor-friendly policies and tax-free advantages, the UAE's new policy may raise questions among entrepreneurs, SMEs, and foreign investors.

In this detailed guide, we’ll break down what corporate tax in Dubai and the broader UAE means, who it applies to, how much is charged, exemptions, and how businesses can stay compliant with the law. Whether you're planning to register a company in Dubai or already operate here, this article is your go-to resource.

What is Corporate Tax?

Corporate tax is a direct tax imposed on the net profit of corporations and other legal entities from their business operations. This means after calculating revenue and deducting business expenses, the remaining profit is taxed.

In the UAE, the Federal Tax Authority UAE (FTA) is the governing body that manages the collection, registration, and regulation of corporate tax under the new framework.

Corporate Tax Rates in the UAE

As of June 1, 2023, the UAE introduced a simple, progressive tax rate structure. Here's how it breaks down:

Taxable Income	Corporate Tax Rate
Up to AED 375,000	0%
Above AED 375,000	9%
Qualifying large multinationals (based on OECD guidelines)	TBD

This tiered approach supports small and medium enterprises while ensuring fair contributions from larger companies.

Who is Subject to Corporate Tax in Dubai and the UAE?

The corporate income tax UAE applies to the following entities:

UAE-incorporated companies, including LLCs, mainland businesses, and free zone entities.
Foreign companies with a permanent establishment in the UAE.
Individuals engaged in business or commercial activity with an annual income exceeding AED 1 million.
Free zone businesses that do not meet the qualifying criteria for exemptions.

So, whether you're a large international corporation or a freelancer conducting business under a license, you may be subject to the UAE’s business tax in Dubai if you meet these criteria.

Corporate Tax Exemptions in Dubai

Dubai still remains tax-friendly despite this shift. Some entities are exempt from corporate tax. These include:

Government entities and government-controlled entities.
Extractive businesses (e.g., oil and gas) and non-extractive natural resource businesses.
Qualifying public benefit entities (e.g., charities, welfare organizations).
Public and private pension funds and social security funds.
Qualifying investment funds.
Wholly-owned UAE subsidiaries of government entities.

For businesses set up in free zones, corporate tax exemptions Dubai are available—but with strict rules.

Corporate Tax in UAE Free Zones

Companies operating within free zones can benefit from a 0% corporate tax rate, but only if they meet the conditions to qualify as a Qualifying Free Zone Person (QFZP). To qualify:

The business must derive qualifying income (such as exports, services within the free zone, etc.).
Maintain adequate substance (e.g., physical office, staff).
Comply with transfer pricing rules.
Must not elect to be taxed at the standard rate voluntarily.

If these conditions aren’t met, the standard corporate tax rate of 9% applies—even to freezone business setup in UAE entities.

Corporate Tax Registration and Filing

All taxable businesses must complete tax registration UAE and obtain a Tax Registration Number (TRN) from the Federal Tax Authority UAE.

Filing Requirements

Businesses must file an annual corporate tax return within 9 months from the end of the financial year.
Returns must be submitted electronically through the FTA portal.
Penalties apply for late filing, incorrect reporting, or failure to register.

For example, if your financial year ends in December 2024, your return is due by September 30, 2025.

Corporate Tax Compliance in Dubai

Complying with tax registration UAE and filing rules is critical. Here’s how you can ensure proper tax compliance:

Maintain detailed accounting records.
Regularly review income thresholds and taxable activities.
Engage with a corporate tax consultant to handle documentation, deductions, and audits.

How Business Setup Type Affects Corporate Tax

Whether you choose a mainland business setup in Dubai or a freezone business setup in UAE, the type of license and operations you select affects your tax obligations.

Mainland Business Setup in Dubai

Subject to corporate income tax on all UAE-sourced income.
Broader scope for business activities and client base.
Greater compliance obligations, including tax registration and filings.

Freezone Business Setup in UAE

Potential corporate tax exemptions, but must meet QFZP criteria.
Restricted to specific business activities to remain exempt.
Ideal for international trading or service-based businesses.

Consult with Dubai business setup consultants to make the right choice for your goals and avoid unwanted tax liabilities.

Why You Need Business Consultants

Setting up a business or handling corporate tax filing alone can be overwhelming. That's where business consultancy in Dubai can make a difference.

Benefits of Hiring Experts

Navigate the corporate tax in Dubai framework without errors.
Ensure all filings are submitted on time.
Optimize your corporate gains tax strategy.
Structure your business to legally minimize tax exposure.

Whether you're launching a startup or restructuring an existing company, engaging Dubai business setup consultants ensures you're on the right path.

FAQs About Corporate Tax in Dubai

1. Is there a corporate tax in Dubai?

Yes. As of June 2023, corporate tax in Dubai is applicable at 9% for businesses with income over AED 375,000.

2. What is the current Dubai corporate tax rate?

0% for income up to AED 375,000.
9% for income exceeding that threshold.

3. Do free zone companies pay corporate tax in Dubai?

Free zone companies can be exempt if they qualify as a QFZP, but if they don’t meet the criteria, they will be taxed at 9%.

4. What happens if I don’t file my corporate tax return?

Non-compliance leads to penalties and possible restrictions on business operations.

5. Can I get help with corporate tax filing in Dubai?

Absolutely. Contact a corporate tax consultant or a business consultancy in Dubai to ensure compliance.

Conclusion

The introduction of the corporate income tax UAE marks a significant milestone in the country's economic evolution. With clear structures, reasonable rates, and multiple exemptions, the tax system still supports business growth.

If you’re planning a business setup in Dubai, ensure that you consult experts, evaluate tax implications, and register on time. Whether you’re an established enterprise or looking to register a company in Dubai for the first time, being informed and compliant will protect your business and support long-term success.