The Corporate Tax Law will be effective from 1 June 2023 with a headline rate of 9% for businesses generating income over AED 375,000.
The CT rate for businesses generating income below 375,000 will be 0%.
Corporate tax registrations are now open for companies through the EmaraTax Portal.
The UAE’s Ministry of Finance (MOF) had previously indicated that a higher rate may apply to large multinationals, the Corporate Tax Law is silent in this respect. More CT law updates are surely to be formed on this aspect
The regime includes features that represent best practices in international taxation.
Several exemptions are available for businesses operating across strategic sectors.
Free zone persons can continue to maintain their 0% tax position subject to meeting certain conditions.
General anti-avoidance and transitional rules apply from the date the law is published in the Official Gazette.
The new UAE corporate tax laws will affect your profits for the financial years starting on or after 1 June 2023.
As a result of the released Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses (Corporate Tax Law). The Ministry of Finance (MoF) enacted a new corporate tax (CT) regime for the UAE on 9 December 2022.
After this development in UAE corporate tax, the Ministry of Finance of the UAE on 31 January 2022 announced the introduction of a Federal Corporate Tax regime on business profits effective for Financial Years starting on or after 1 June 2023. This provides you a period to work with Inspire Tax Consultancy to prepare and assess for the Corporate Law impacts ahead of the effective date and make necessary compliances to avoid high rates of penalties.
Corporate Tax in UAE is a form of direct tax levied on the net income or profit of corporations and businesses. With the new updates on the UAE corporate tax law, licensees operating in UAE are required to assess the impact of the upcoming regulations to their business and undertake the necessary compliance ahead of time. UAE Tax Authorities have already stated that non-compliance of UAE Corporate Tax Law will attract high rates of penalties.
As per information available from MoF, the Corporate Tax rates after 1 June 2023 will be as follows:
Category/ Taxable Income
Corporate Tax Rate (%)
Taxable income up to AED 375,000
Taxable income above AED 375,000
Large multinationals (having consolidated global revenue exceeding EURO 750 million – equivalent to AED 3.15 billion)
Different tax rates. ( MOF had previously indicated that a higher rate may apply to large multinationals, the Corporate Tax Law is silent in this respect. More CT law updates are surely to be formed on this aspect)
Corporate Tax on UAE Free Zone Companies
UAE companies that have their company or branches registered in UAE freezones will fall within the scope of corporate tax. All freezone businesses will have to meet corporate tax filing requirements in the UAE.
However, If your free zone businesses complies with all regulatory requirements, then your free zone business can continue to receive tax incentives. Businesses can receive guidance from professional tax consultants from Inspire tax consultancy to check if they can receive tax incentives.
Below Corporate tax conditions are also applicable if you’re a business operating in an UAE free zone:
Free zone businesses can benefit from a 0% corporate tax rate on income earned from trading with businesses out of the UAE and businesses operating in the same or any other free zone.
If a free zone business has a mainland branch, a 9% corporate tax rate will apply only to the income sourced from the mainland. Income from the free zone branch can benefit from a 0% corporate tax rate.
It is common for a free zone business without a mainland branch to earn income from its business with the UAE mainland. In such cases, it can continue to benefit from the 0% corporate tax rate. The mainland sourced income is classified as ‘passive’ income such as interest, royalties, dividends and capital gains from owning shares in a mainland company
Income earned from the transactions between Free Zone businesses and their group of companies located in mainland UAE will be subject to 0% corporate tax. However, payments made by the mainland group company to the free zone business will not be deemed as a deductible expense.
A free zone business operating in a UAE VAT Designated Zone is entitled to a 0% corporate tax rate on income earned from the sale of goods to UAE mainland businesses that are the importer of record of those goods.
A free zone business earning any other mainland sourced income will be disqualified for the 0% corporate tax benefit in respect of all their income
If a Free Zone business benefits from the 0% corporate tax in respect of mainland sourced income, such income will be within the scope of withholding tax at a 0% rate.
We at Inspire Tax Consultancy can guide you on the potential impact of corporate tax on your business and operations. Our team of corporate tax agents in Dubai and Abu Dhabi will provide the required support in supporting your business growth while avoiding any hefty penalties due to new corporate tax policies.
Landline: +971 4 2322214
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