Corporate Tax 101: What Business Owners Need to Know in 2024 and 2025
Watch Dexter Destajo, owner of LiveSync Accounting:
With the introduction of Corporate Tax in the UAE, many businesses are entering new territory. This summary breaks down the essential concepts, legal sources, and tax rates to help you understand how it affects your company—and what you need to do to stay compliant.
What Is UAE Corporate Tax?
Corporate Tax is a direct tax on business profits, not on revenue. It’s separate from VAT and personal income tax. Only companies and business profits are subject to it—individuals’ salaries or personal earnings are not affected.
Why Was Corporate Tax Introduced in the UAE?
The UAE introduced Corporate Tax for several reasons:
- Align with international tax standards (e.g., OECD minimum tax rules)
- Attract global investors with a competitive low rate (9%)
- Diversify revenue beyond oil
- Ensure transparency, fairness, and simplicity in the tax system
The Two Corporate Tax Regimes:
- Standard Corporate Tax Regime:
- 0% tax on profits up to AED 375,000
- 9% tax on profits exceeding AED 375,000
- Qualified Free Zone Regime:
- 0% tax on qualifying income
- 9% tax on non-qualifying income
- Note: Simply being in a free zone doesn’t automatically qualify your business for this regime—you must meet specific conditions.
Legal Sources of Corporate Tax in the UAE:
To stay compliant, businesses must rely on multiple official resources:
- Federal Law No. 47 of 2022 (main corporate tax law)
- Cabinet and Ministerial Decisions (detailed clarifications)
- FTA Decisions (for case-specific guidance)
- FTA Guidelines (step-by-step instructions, especially for filing)
- Public Clarifications (layman explanations with examples)
✅ Tip: Don’t rely only on the law. Guidelines and clarifications are key to understanding how the law applies to your real-world scenarios.
Filing & Compliance Essentials:
- Annual tax filing (not quarterly like in some countries)
- Self-assessed tax: companies calculate and file their own tax returns
- Deadline: Within 9 months after the end of your financial year
- Taxable profit must be calculated using approved accounting standards:
- Full IFRS: Required for revenue > AED 50M
- IFRS for SMEs: For revenue between AED 3M–50M
- Cash basis accounting: Allowed for revenue < AED 3M
Key Takeaways:
- The 9% rate is one of the most competitive globally
- The AED 375,000 exemption gives small businesses breathing room
- Free zone companies must qualify to enjoy the 0% rate
- The system is designed to be simple, fair, and transparent, but you need to be proactive in understanding the rules
Need Help Navigating UAE Corporate Tax?
At LiveSync Accounting, we specialize in helping UAE businesses transition smoothly into the corporate tax era. From entity classification to return preparation, we’ve got you covered.
