UAE Corporate Tax Law Explained: A Practical Guide for Businesses

A Complete Guide by Direct Assist – Chartered Certified Accountants

Published: 28 January 2026

The introduction of UAE Corporate Tax marks a major shift in the country’s tax landscape. Long known for its tax-friendly environment, the UAE now levies corporate tax on business profits under Federal Decree-Law No. 47 of 2022.

The law applies to financial years starting on or after 1 June 2023 and establishes a clear framework for how businesses calculate, report, and pay corporate tax.

At Direct Assist, we help UAE and international businesses understand their obligations and remain compliant while planning efficiently. This guide breaks down the key provisions of the UAE Corporate Tax Law in plain English.

What Is UAE Corporate Tax?

UAE Corporate Tax is a direct federal tax imposed on the net profits of businesses operating in the UAE.

It applies uniformly across all seven emirates and is administered by the Federal Tax Authority (FTA).

Scope of UAE Corporate Tax

Corporate Tax applies throughout the UAE, including:

• Mainland businesses

• Free Zone entities (subject to conditions)

• Branches of foreign companies

As a federal tax, it replaces the historic emirate-level tax regimes that were largely inactive.

Objective of Introducing Corporate Tax

The UAE introduced corporate tax to:

• Strengthen its position as a credible global business hub

• Align with international tax transparency standards

• Meet OECD and global minimum tax expectations

• Support long-term economic sustainability

The aim is not to discourage business — but to create a modern, trusted tax system.

Tax Period

A tax period is the 12-month financial year used by the business for preparing financial statements.

Examples:

• If your financial year runs from 1 July 2023 to 30 June 2024, UAE Corporate Tax applies from 1 July 2023

• If your financial year runs from 1 January 2023 to 31 December 2023, Corporate Tax applies from 1 January 2024

Who Is a Taxable Person?

Under Article 11, Corporate Tax applies to:

• Resident persons, and

• Non-resident persons with UAE-sourced business income

Further guidance on taxable persons and income determination is provided in Articles 11 and 20 of the law.

What Is Taxable Income?

Taxable income is based on the business’s accounting net profit or loss, adjusted for specific items required by the Corporate Tax Law.

Adjustments typically include:

• Non-deductible expenses

• Exempt income

• Reliefs and elections under the law

The starting point is always properly prepared financial statements.

Applicable Corporate Tax Rates (Article 3)

The UAE operates a tiered corporate tax rate system:

• 0% on taxable income up to AED 375,000

• 9% on taxable income exceeding AED 375,000

This structure supports small businesses and start-ups while applying a modest rate to larger profits.

Corporate Tax Calculation Example

If a business has taxable income of AED 500,000:

• First AED 375,000 → taxed at 0%

• Remaining AED 125,000 → taxed at 9%

Corporate Tax payable:
AED 125,000 × 9% = AED 11,250

Any eligible foreign tax credits may reduce the final tax payable.

Exempt Persons (Article 4)

Certain entities are fully exempt from UAE Corporate Tax, including:

• Government entities

• Government-controlled entities

• Extractive and non-extractive natural resource businesses (subject to conditions)

• Qualifying Public Benefit Entities

• Qualifying Investment Funds

• Regulated pension and social security funds

• UAE entities wholly owned and controlled by exempt persons (subject to criteria)

Additional references are made to Articles 23 and 25.

Income Exempt From Corporate Tax

Even for taxable persons, some income categories are exempt, including:

• Dividends and profit distributions from UAE or qualifying foreign participations

• Certain capital gains, foreign exchange gains, and impairment gains

• Income from foreign branches where a Foreign Permanent Establishment exemption is elected

• Income earned by non-residents from international shipping or aviation (subject to conditions)

Group-Level Corporate Tax

A group of UAE companies may elect to form a tax group and be treated as a single taxable person, provided conditions are met.

Key conditions include:

• Minimum 95% ownership

• Neither parent nor subsidiary is an exempt person

Benefits include:

• Filing one corporate tax return for the group

• Offsetting tax losses between group companies

Detailed rules are set out in Article 40.

Corporate Tax Returns (Article 53)

• Corporate Tax returns must be filed electronically

• Filing and payment are due within 9 months of the end of the financial year

• Only one return per tax period is required

Transfer Pricing

The UAE Corporate Tax Law introduces arm’s length transfer pricing rules under Article 34.

Related-party transactions must:

• Reflect market terms

• Be supported by documentation

• Align with OECD transfer pricing principles

Financial Statements (Article 54)

The FTA may request submission of the financial statements used to determine taxable income.

This highlights the importance of:

• IFRS-compliant accounts

• Accurate bookkeeping

• Clear audit trails

Record Keeping Requirements (Article 56)

Businesses must retain all Corporate Tax-related records for 7 years from the end of the relevant tax period.

This includes:

• Financial statements

• Invoices and contracts

• Tax computations

• Supporting schedules

Summary: Key Takeaways

• UAE Corporate Tax is now in force for business profits

• It applies across all emirates as a federal tax

• Employment income of individuals is not subject to corporate tax

• Foreign taxes may be credited against UAE Corporate Tax

• The Federal Tax Authority administers and enforces the law

• Records must be retained for 7 years

• Corporate Tax returns are filed once per financial year, electronically

How Direct Assist Can Help

At Direct Assist, we support UAE businesses with:

✅ Corporate Tax registration and compliance
✅ Tax computations and filings
✅ IFRS-aligned financial statements
✅ Transfer pricing advisory
✅ Group tax structuring
✅ Ongoing bookkeeping and tax planning

Need help navigating UAE Corporate Tax?

👉 Contact Direct Assist today for a free consultation or instant online quote.
Direct Assist – Chartered Certified Accountants helping businesses stay compliant and confident in the UAE.