Overview of the Corporate Income Tax Regime in the UAE
The United Arab Emirates (UAE) introduced a federal Corporate Income Tax (CIT) regime effective June 1, 2023, marking a significant shift in its fiscal policy aimed at aligning with global tax standards and supporting economic diversification.
Key Features:
Standard Rate:
- A 9% corporate tax applies to taxable income exceeding AED 375,000.
Zero Tax Threshold:
- 0% tax applies to taxable income up to AED 375,000, supporting small and start-up businesses.
Scope:
CIT applies to:
- UAE-incorporated businesses.
- Foreign entities with a permanent establishment in the UAE.
- Freelancers and sole proprietors earning business income above the threshold.
- Certain free zone entities, unless they meet specific conditions to retain tax-free status.
Exemptions:
Certain entities remain exempt, such as:
- Government and government-controlled entities.
- Extractive and non-extractive natural resource businesses (subject to emirate-level taxation).
- Qualifying public benefit entities and pension funds.
Small Business Relief:
Available for resident businesses with revenue not exceeding AED 3 million in a tax period (available until the end of 2026), allowing them to be treated as having no taxable income.
Transfer Pricing Rules:
Businesses must comply with OECD-based transfer pricing regulations and maintain documentation for related party transactions.
Registration & Filing:
All taxable persons must register with the Federal Tax Authority (FTA) and file annual tax returns, regardless of their income level.