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What is Corporate Tax in the UAE?
What are the UAE Corporate Tax Brackets?
The UAE Corporate Tax system applies a tiered structure based on taxable profits. Businesses with net profits up to AED 375,000 are taxed at 0%, supporting startups and small enterprises.
Profits exceeding this threshold are taxed at the standard rate of 9%, ensuring larger companies contribute fairly to the federal economy. Multi-National Companies (MNCs) with consolidated revenue surpassing €750 million (approximately AED 3.15 billion) are subject to a 15% rate under the OECD Pillar Two global minimum tax rules.
Certain free zone entities may qualify for 0% tax on qualifying income if they meet specific regulatory and compliance requirements. This bracketed approach balances economic growth, encourages entrepreneurship, and aligns the UAE with international tax practices.
The system is designed to be transparent, predictable, and business-friendly, providing clear thresholds that help companies plan their finances efficiently while maintaining compliance with the FTA regulations. Free zone businesses, extractive industries, and qualifying investment funds may have additional provisions or exemptions based on their activities and adherence to FTA rules.
| Taxable Profit (AED) | Corporate Tax Rate | Notes |
|---|---|---|
| Up to AED 375,000 | 0% | Supports small businesses and startups |
| Above 375,000 | 9% | Standard rate for larger businesses |
| Consolidated revenue > AED 3.15B | 15% | Applies under the OECD Pillar Two global minimum tax rules for MNCs (Multi-National Companies) |
| Free zone entities (qualifying) | 0% | Must meet regulatory and compliance requirements to maintain exemption |
| Extractive industries | Varies | Tax rate applies according to specific guidelines for oil, gas, and mining |
| Qualifying investment funds | 0% | Exempt if approved and compliant with FTA conditions |
Who is a Taxable Person?
A taxable person in the UAE is any individual or business entity required to pay corporate tax under the UAE Corporate Tax Law. This includes UAE-resident companies, branches of foreign businesses operating locally, and certain free zone entities that do not meet the conditions for a 0% tax rate.
Taxable persons must calculate their tax liability, file returns, and pay the applicable tax to the FTA. Businesses exceeding the mandatory registration threshold are required to register with the FTA and maintain accurate financial records to support their filings.
In short, any business or entity generating taxable income in the UAE, which is not fully exempt, is considered a taxable person under the law.
Steps to Calculate Your Tax Liability
Calculating your corporate tax liability in the UAE involves a structured approach to ensure accuracy and compliance with FTA regulations. The key steps include:
- Determine Taxable Income: Start by calculating your net profits, including revenue from all sources, and deducting allowable business expenses.
- Apply Applicable Tax Rates: Use the UAE Corporate Tax brackets — 0% for profits up to AED 375,000, 9% for profits above this threshold, and 15% for multinational enterprises exceeding €750 million (≈ AED 3.15 billion) under Pillar Two rules.
- Consider Exemptions and Deductions: Identify any exemptions applicable, such as qualifying free zone income, investment fund income, or sector-specific reliefs.
- Adjust for Prior Year Losses: Offset taxable profits with allowable losses carried forward from previous years, if applicable.
- Compute Tax Payable: Multiply the taxable income by the applicable rate to determine the corporate tax liability.
- File and Remit Tax: Submit your corporate tax return to the FTA and pay the calculated tax within the prescribed deadlines to remain compliant.
This process ensures that businesses accurately calculate their obligations while optimizing compliance and leveraging available reliefs.
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