The introduction of a federal Corporate Tax (CT) in the UAE under Federal Decree-Law No. 47 of 2022 marked a historic shift in the UAE's tax landscape. For the first time, businesses operating in the UAE — long renowned for its zero-tax environment — are now subject to a structured corporate income tax regime. For SMEs, understanding this regime is not optional: it is an operational necessity.
What is UAE Corporate Tax?
UAE Corporate Tax applies to taxable persons — both resident and non-resident businesses operating in the UAE — at the following rates:
- 0% on taxable income up to AED 375,000
- 9% on taxable income exceeding AED 375,000
- A different rate (to be confirmed) for large multinationals subject to the OECD Pillar Two global minimum tax rules
The CT regime applies to financial years starting on or after 1 June 2023 for most businesses. This means that most UAE SMEs with a 1 January to 31 December financial year were subject to CT from the financial year commencing 1 January 2024.
Who Must Register for Corporate Tax?
All businesses incorporated in the UAE — including Free Zone entities, Mainland companies, and branches of foreign companies — must register for CT on the EmaraTax platform within the deadlines prescribed by the Federal Tax Authority (FTA). Registration is mandatory even for businesses that expect to be exempt or that fall below the AED 375,000 threshold.
Key categories of taxable persons include:
- UAE incorporated companies (LLCs, PJSCs, etc.)
- Free Zone entities (Qualifying Free Zone Persons may benefit from a 0% rate on qualifying income)
- Foreign legal entities that have a Permanent Establishment (PE) in the UAE
- Non-resident natural persons earning UAE-sourced business income above AED 1 million
Key Exemptions and Reliefs
The UAE CT legislation includes several important exemptions and reliefs that SMEs should be aware of:
- Small Business Relief: Businesses with revenue below AED 3 million per tax period may elect for Small Business Relief, effectively treating their taxable income as zero for CT purposes.
- Qualifying Free Zone Persons: Free Zone entities meeting specific conditions can benefit from a 0% CT rate on their qualifying income.
- Participation Exemption: Dividends and capital gains from qualifying shareholdings may be exempt from UAE CT.
- Government Entities & Extractive Businesses: Government entities and natural resource extraction businesses are generally exempt from UAE CT.
Filing and Compliance Requirements
UAE CT compliance involves several ongoing obligations:
- Annual CT Return: Must be filed within 9 months of the end of the relevant tax period
- Tax Payment: Due at the time of filing the CT return
- Transfer Pricing: Related-party transactions must be conducted on arm's length terms, with disclosure requirements for transactions above AED 40 million
- Record Keeping: Businesses must maintain financial records for a minimum of 7 years
What Should UAE SMEs Do Now?
If you have not already addressed your CT obligations, the following steps should be taken immediately:
- Register on the EmaraTax portal if you have not already done so
- Engage a qualified UAE CT advisor to assess your taxable income position
- Review your financial statements to identify deductible and non-deductible expenses
- Assess whether you qualify for Small Business Relief or Free Zone qualifying income treatment
- Prepare or review your transfer pricing documentation for related-party transactions
- Ensure your accounting records are IFRS-compliant and audit-ready
Penalties for non-registration, late filing, and failure to maintain adequate records can be significant — with administrative penalties ranging from AED 500 to AED 20,000 per violation under the UAE Tax Procedures Law.
How Intex Global Can Help
Intex Global's Corporate Tax Advisory team provides comprehensive UAE CT support — from initial registration through to return filing, transfer pricing documentation, and FTA audit representation. Our team has deep expertise in UAE CT law and works closely with clients to ensure not only full compliance, but strategic optimisation of their tax position.
Contact us today to schedule a complimentary initial CT consultation.
