The United Arab Emirates remains one of the most attractive jurisdictions for doing business due to its transparent tax policy and the absence of many conventional taxes. However, with recent legislative changes, it is important to understand the obligations that arise for companies and individual entrepreneurs.
Corporate tax returns must be filed and paid once—no later than 9 months after the end of the financial year.
Navigation:
- Who Is Subject to Corporate Tax in the UAE?
- Tax Base and Rates
- Tax Incentives for Free Zone Companies
- Tax-Exempt Categories
- Tax Period and Registration Deadlines
- Value-Added Tax (VAT)
- Taxes in the Emirates: A Summary
- How We Can Help
Who Is Subject to Corporate Tax in the UAE?
Under current legislation, both residents and non-residents conducting business using tangible or intangible assets in the UAE are subject to corporate tax.
Resident taxpayers include:
Legal entities incorporated in the UAE or considered resident, including foreign companies whose management and control are exercised from within the Emirates;
Individuals officially engaged in commercial activity within the country.
Non-residents are only taxed on income earned within the UAE, provided that:
They maintain a permanent establishment (such as an office, production facility, branch, or authorized representative);
The income is derived from sources located in the UAE.
📌 Please note: Branches of foreign banks are also subject to corporate tax regardless of the jurisdiction of their parent company. Previously, their taxation was regulated at the emirate level.
Tax Base and Rates
The taxable base is the total annual income from all business activities.
For residents: global income is considered;
For non-residents: only income earned within the UAE is taxed.
Corporate tax rates:
9% — on income exceeding AED 375,000 annually
0% — on income below this threshold
Tax Incentives for Free Zone Companies
Companies registered in Free Zones may benefit from tax exemptions if the following conditions are met:
No commercial activity is conducted on the UAE mainland;
Financial statements are submitted on time;
Income is derived from “qualifying activities” as defined by legislation.
⚠️ If income is deemed “non-qualifying,” a 9% tax is applied to the entire amount from the first dirham—there is no exemption up to AED 375,000.
Tax-Exempt Categories
According to current tax legislation, several legal entities are exempt from paying corporate tax. These include:
Companies engaged in the extraction and processing of natural resources (taxed at the emirate level);
Entities receiving dividends and capital gains (note: residents of other countries, such as Russia, must declare this income in their home jurisdiction);
Companies deriving income from internal restructuring or transactions between related group entities;
Government bodies and institutions;
Non-profit and public interest organizations, registered in accordance with regulations;
Charities that meet federal criteria;
Pension and social security funds, and other social welfare entities;
Qualified investment funds recognized under the law.
Tax Period and Registration Deadlines
In the UAE, the tax period for corporate taxation is defined by the company's chosen financial year.
Entities that began operations on or after June 1, 2023, are automatically subject to the new tax regulations. They must register as taxpayers by February 28, 2025, with their first tax period ending May 31, 2024.
For companies registered later—e.g., on January 1, 2024—registration must be completed by September 30, 2025, and the first tax period will end December 31, 2024.
For entities that began operating before the law took effect, tax obligations arise from the beginning of the first financial year starting after June 1, 2023. For instance, a company founded in January 2023 will begin paying corporate tax from January 2024.
Value-Added Tax (VAT)
In 2023, the VAT framework in the UAE remained unchanged, with a 5% rate. Registration is:
Voluntary for businesses with taxable turnover exceeding AED 187,500;
Mandatory if turnover exceeds AED 375,000.
There are two VAT-exempt categories: fully exempt entities and those subject to a 0% VAT rate. The distinction is important:
Zero-rated companies must file VAT returns and can reclaim input VAT;
Exempt companies are not required to file and cannot claim VAT refunds.
Zero VAT rate applies to:
International transport;
Exports of goods and services outside the GCC;
Supply of crude oil and natural gas;
Sale of new (primary) real estate;
Healthcare and educational services;
Export of any services where the provider is in the UAE for less than one month.
VAT-exempt taxpayers include:
Companies operating in Free Zones;
Directors of public or private institutions receiving compensation in cash or in kind.
VAT filings and payments are due no later than 28 days after the end of the reporting period.
The reporting frequency is monthly for large companies and quarterly for others.
Taxes in the Emirates: A Summary
Most businesses (with some exceptions) are subject to three main taxes:
Corporate tax;
VAT;
Excise tax.
The UAE does not impose:
Personal income tax;
Payroll tax;
Tax on the sale or purchase of shares or other assets;
Tax on rental income;
Real estate sales tax (only a registration fee applies);
Social contributions (for UAE and other GCC citizens, including Russians).
How We Can Help
BM Morrison Partners DMCC offers a full range of tax advisory and corporate legal services in the UAE.
Our experts can assist you with:
Assessing tax risks and applicability of new regulations;
Registering with tax authorities;
Optimizing company structures in line with legislation;
Timely preparation and submission of tax reports.
Need Tax Advice in the UAE?
📞 Contact us today to receive a personalized consultation from the specialists at BM Morrison Partners.
We’ll help you adapt to the new requirements and ensure the legal safety of your business in the UAE.