The UAE introduced Corporate Tax starting from June 2023. Now, in 2025, all businesses falling under the law are expected to be fully compliant. This guide explains who is affected, what the rates are, and how businesses can stay prepared.
1. When Did Corporate Tax Start?
- Effective from: Financial years starting on or after 1 June 2023
- Legal Basis: Federal Decree-Law No. 47 of 2022
2. What Are the Corporate Tax Rates?
| Taxable Income | Rate |
|---|---|
| Up to AED 375,000 | 0% |
| Above AED 375,000 | 9% |
| Multinational groups* | 15% (expected) |
*Applies to companies with global revenues above EUR 750 million
More on OECD Pillar Two
3. Who Needs to Pay Corporate Tax?
Taxable:
- UAE-based companies
- Foreign companies with a permanent establishment in the UAE
- Free Zone businesses (on non-qualifying income)
Exempt:
- Government and some government-owned entities
- Public benefit organizations
- Qualifying investment funds
- Oil and gas companies already taxed locally
4. How Is Taxable Income Calculated?
Taxable income is based on your accounting net profit, with some adjustments.
Common deductions:
- Employee salaries
- Business operating expenses
- Interest (subject to limits)
- Depreciation and amortization
- Carry-forward business losses
5. What About Free Zones?
Free Zone businesses can still benefit from a 0% tax rate on qualifying income—but only if they meet these conditions:
- Maintain economic substance in the UAE
- Do not conduct business with the mainland (unless it’s qualifying)
- Comply with transfer pricing rules
6. Transfer Pricing Rules
If your business has related party transactions, you must:
- Follow OECD-based transfer pricing rules
- Submit a disclosure form
- Prepare proper documentation (Master File and Local File if required)
7. Need Help with Corporate Tax?
Understanding and complying with Corporate Tax regulations can be complex. If you need professional assistance with registration, reporting, or tax planning, consider reaching out to a trusted advisor.
👉 Get expert help from IK Business Consultants
Final Thoughts
Corporate Tax is now a part of doing business in the UAE. With the right preparation, compliance can be straightforward—and even provide an opportunity to improve financial planning and reporting.
Stay informed, stay compliant, and if in doubt, seek professional advice.
