UAE Corporate Tax Law: Key Highlights for Business Owners in Dubai
If you’re running a business in Dubai, there’s one new reality you can’t afford to ignore Corporate Tax in the UAE.
From June 2023, the UAE introduced a federal corporate tax for the first time in its history. While the UAE continues to offer a globally competitive tax environment, business owners, especially operating businesses in Dubai, must now understand what’s changed, what’s required, and how to align their operations to stay compliant.
This article breaks down the key highlights of the UAE Corporate Tax Law, what it means for business owners, who it applies to, exemptions, compliance requirements, and how to plan ahead.
Why Was The UAE Corporate Tax Introduced?
The UAE introduced corporate tax as a strategic step to align with international tax standards, reduce reliance on oil revenues, and create a more transparent and sustainable economic model. It also reinforces the country’s commitment to global frameworks such as the OECD’s BEPS initiative. This shift not only strengthens the country’s global reputation but also ensures a fair and transparent tax system for all.
So, What Exactly Is It?
Corporate tax in UAE is a federal tax levied on the profits of businesses at a standard rate of 9% on annual taxable income exceeding AED 375,000. Income below this threshold is taxed at 0%, allowing room for startups and small businesses to grow.
Who Does It Apply To?
The UAE corporate tax applies to most legal entities and individuals conducting business activities under a commercial license in the UAE, including mainland companies, free zone entities (unless exempt as QFZPs), and foreign businesses with a permanent establishment or Nexus in the country.
What Is a Qualifying Free Zone Person (QFZP)?
If your business operates in a free zone like DMCC, Dubai South, or JAFZA, you can still enjoy a 0% corporate tax rate, but only if you qualify as a QFZP.
To maintain this status, a company must:
- Earn income from eligible activities
- Have adequate substance in the UAE (office, staff, operations)
- Comply with transfer pricing and maintain audited financials
- Avoid generating income from mainland UAE unless permitted under specific rules
Failing to meet these criteria means your free zone company could become fully taxable at 9%.
Who Is Exempt from UAE Corporate Tax?
Not every entity in the UAE is subject to corporate tax. The law outlines clear exemptions for the following:
- Government Entities: Departments and bodies owned or controlled by the UAE government, provided they don’t conduct unrelated commercial activities.
- Wholly-Owned Government Companies: Exempt if they carry out sovereign or mandated activities, not regular commercial business.
- Extractive and Non-Extractive Resource Businesses: Companies in oil, gas, and natural resource sectors, operating under concession agreements and already taxed at the Emirate level.
- Qualifying Free Zone Persons (QFZPs): Free zone companies can enjoy a 0% rate if they meet strict substance, income, and compliance requirements like earning qualifying income and maintaining audited financials.
- Charities and Public Benefit Entities: Registered non-profits approved by the Cabinet and operating solely for public welfare.
- Pension and Investment Funds: Certain regulated funds that meet eligibility and operational criteria.
Mandatory Compliance and Filing Requirements
Regardless of whether you owe tax or not, compliance is not optional. All businesses subject to the UAE Corporate Tax Law must:
- Register with the Federal Tax Authority (FTA)
- Maintain audited financial statements
- Submit a corporate tax return within 9 months of the financial year-end
- Comply with transfer pricing documentation, if applicable
Even exempt entities must register and may be required to file a return to confirm their exempt status.
What Should Business Owners in Dubai Do Now?
Whether you’re a startup founder, SME owner, or managing a multinational branch, here’s what you should prioritize:
- Determine if you’re liable for corporate tax
- Register with the FTA (even if exempt)
- Understand your entity type and structure, especially if you operate in a free zone
- Set up accurate accounting and bookkeeping systems
- Seek professional tax advice to ensure compliance and optimization
The earlier you act, the better positioned your business will be to thrive in the new tax environment.
Small Business Relief: A Breather for Startups
To ease the transition for startups and micro-businesses, the UAE government introduced Small Business Relief. If your revenue is under AED 3 million annually, your business can elect to be treated as having no taxable income, effectively benefiting from a 0% tax rate even if your profits exceed AED 375,000.
This incentive is available until the end of 2026 and can provide crucial breathing room for new businesses scaling up in Dubai.
Conclusion
Whether you’re operating in a mainland company, a free zone, or a government-backed entity, knowing your obligations and your options can help you stay compliant and financially optimized. From qualifying for exemptions and small business relief to meeting filing deadlines and maintaining audited records, proactive planning is key.
Don’t wait for the deadline to hit. Use this period to reassess your financial structure, consult tax professionals, and align your operations with the new tax regime. With the right knowledge and support, your business in the UAE can continue to grow confidently and compliantly.
