UAE: Introduction of Federal Corporate Tax

federal corporate tax

On 31 January 2022, the UAE Ministry of Finance (MoF) announced the introduction of a federal corporate tax (CT) in the UAE. The tax will be effective for financial years starting on or after 1 June 2023.

The UAE federal corporate tax regime will be based on international best practices, with a low/minimal compliance burden on businesses.

Rates for Corporate Tax in the UAE:

UAE Corporate Tax will be applicable at the following rates:

Taxable incomeUAE CT rate
AED 0 – AED 375,0000%
Above AED 375,0009%

Corporate tax may come into effect on or after 1 June 2023 and will apply to profits generated during financial years starting on or after 1 June 2023. The UAE Federal Corporate Tax Authority will be responsible for administering, collecting, and enforcing the federal corporate tax. Ministry will be issuing the rules and regulations.

Moreover, the federal corporate tax will apply to all UAE businesses and commercial activities undertaken by legal entities or individuals across the seven emirates. The extraction of natural resources will remain subject to an emirate-level corporation tax.

All activities undertaken by a legal entity that falls under the scope of the corporate regime are deemed as “business activities”. On the other hand, an individual will be deemed to have a “business” that falls within the scope of the Corporate tax Law, if the individual has (or is generally required to have) a business license or permit to carry out their relevant activities in the UAE.

Companies incorporated in UAE’s free zones or financial free zones will also be subject to the federal corporate tax. However, it appears that such companies will continue to enjoy applicable tax breaks and incentives in the manner and for the duration set out under the legal framework of the relevant free zone authority.

A DIFC- or ADGM-incorporated company is subject to a zero-tax rate for a period of 50 years from the time the law in question enters into effect. Accordingly, DIFC- and ADGM-incorporated companies could expect to remain subject to zero tax rates until 2071 and 2063, respectively.


Rates Under Federal Corporate Tax:

Following are the tax rates for Federal Corporate Tax:

  1. A tax rate of 0% for taxable income up to AED 375,000 (c. USD 102,110).
  2. A tax rate of 9% for taxable income above AED 375,000 (c. USD 102,110).
  3. A different tax rate for large multinationals that meet specific criteria set with reference to the Global Anti-Base Erosion Model Rules (Pillar Two) of the OECD Base Erosion and Profit Shifting project.

Non-taxable Income:

Following is the list of Non-taxable income:

federal corporate tax
  1. Firstly, An individual’s salary or income earned through employment. However, an individual will be subject to federal corporate tax if his or her income is earned from activities undertaken under a freelance license or permit.
  2. Secondly, investment in real estate by individuals in their personal capacity, provided the individual is not required to obtain a commercial license or permit to carry out such activity in the UAE.
  3. Thirdly, dividends, capital gains, and other income earned from owning shares or other securities in a personal capacity.
  4. Lastly, Interest and other income earned by an individual from bank deposits or saving schemes.

Exempt Income in Federal Corporate Tax:

  1. The Ministry has also stated that the following will be exempt from corporate tax:
  2. Dividends and capital gains earned by a UAE business from “qualifying shareholdings” (i.e., ownership interest in a UAE or foreign company that meets certain conditions to be specified under the federal corporate tax Law).
  3. In addition to the above requirements, qualifying the intra-group transactions and reorganizations that meet certain conditions and requirements to be set out under the Corporate Tax Law.

Please note an enacted UAE Corporate Tax Law is still pending issuance from the Authorities. Further, in the coming months circulation of clarification is expected.


Final Note:

The new Corporate Tax laws will irrevocably influence business operations and Mergers & Acquisitions. We advise companies to reassess their future plans and business structures in light of the new federal corporate tax laws.


N.R. Doshi & Partners has been delivering impeccable accounting and financial services for the last 35 years. Henceforth, if you need any assistance regarding the new Corporate Tax laws or accounting, we are just a click away. Simply write to us at enquiries@nrdoshi.ae.


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