What is corporate tax in the UAE?

For most of its history the UAE had no federal tax on company profits. That changed with Federal Decree-Law No. 47 of 2022, and the regime applies to financial years beginning on or after 1 June 2023. If you set up here expecting a zero tax jurisdiction, the honest summary is that the UAE is still a low tax jurisdiction with a real compliance obligation attached.

The rates

There are two headline rates for ordinary businesses:

• 0 per cent on taxable income up to AED 375,000.
• 9 per cent on taxable income above AED 375,000.

A separate rate applies to large multinational groups, which is not the situation of the companies this article is written for. The word that matters in both lines is taxable income, meaning profit adjusted under the corporate tax rules, not turnover and not the figure at the bottom of your bank statement.

Compared with corporate tax across most of Europe, 9 per cent remains low. The change is not the burden, it is that a filing obligation now exists where none did before.

Who it applies to

Corporate tax reaches all businesses and individuals conducting business activities under a commercial licence in the UAE. It also covers free zone businesses, foreign entities that conduct trade in the UAE on a regular basis, banking operations, and businesses in real estate management, construction, development, agency and brokerage.

Free zone companies deserve a specific note, because the assumption that a free zone licence means exemption is common and wrong. Free zone businesses are inside the regime. A free zone person meeting the conditions in the legislation may benefit from preferential treatment, but that is a set of conditions to satisfy and evidence, not a status you get automatically with the licence.

Registration applies even when the tax does not

This is the point that costs businesses money. Taxable persons are required to register for corporate tax even if they are already registered for VAT, and registration is not conditional on having profits above AED 375,000. A company sitting comfortably in the 0 per cent band still registers, still files, and still faces penalties if it does neither.

Registration runs to a timeline set by the Federal Tax Authority, and the deadline depends on when your company was established. That is covered in corporate tax registration deadlines in the UAE.

Corporate tax and VAT are separate

The two taxes share a threshold figure of AED 375,000, which causes genuine confusion. They are unrelated. VAT is charged at 5 per cent on supplies and turns on your taxable supplies and imports. Corporate tax is charged on profit. Different registrations, different returns, different deadlines. See VAT registration in the UAE for that side of it.

What it means in practice

Corporate tax is calculated on profit, and profit comes from accounts. That is the real shift for owners who ran a UAE company on a light touch basis: the tax return depends on bookkeeping that stands up to inspection. Businesses that kept records loosely because nothing depended on them now find that something does.

For Scandinavian owners the mechanics will feel familiar even though the numbers do not. You keep proper books, you produce financial statements, you file, you pay what is due. The rate is a fraction of what you are used to at home. The discipline is not.

Get the numbers right before the deadline

Digi-Tal keeps the books and the compliance reporting in order for UAE companies, from our own Dubai entity, at a fixed price from 995 AED a month excluding VAT. Tell us about your setup and we will come back within one business day.

Sources: rates, threshold, effective date and scope from the UAE Government portal, Corporate tax; the registration requirement for existing VAT registrants from the Federal Tax Authority corporate tax FAQs. Check your own position with the FTA before acting.