What is corporate tax in the UAE?

UAE Corporate Tax is a form of direct tax levied on the net income of corporations and other businesses.

Corporate Tax is sometimes called “Corporate Income Tax” or “Business Profits Tax” in other jurisdictions.

1. UAE companies and other legal entities incorporated or managed and controlled within the UAE.
2. Individuals conducting business or business activities in the UAE, as specified by upcoming Cabinet decisions.
3. Foreign legal entities (non-residents) with a Permanent Establishment in the UAE, as explained in Section 8 of the law.
4. Companies established in UAE Free Zones are also liable for Corporate Tax and must comply with the law’s requirements. However, those meeting specific criteria as Qualifying Free Zone Persons can benefit from a 0% Corporate Tax rate on qualifying income (conditions detailed in Section 14).
5. Non-resident entities without a Permanent Establishment in the UAE or earning UAE income not related to their Permanent Establishment may face Withholding Tax, usually at a rate of 0%. This tax is deducted at the source by the payer on payments like dividends, interest, royalties, and other income types across borders.

The types of businesses or organizations that are exempt from UAE corporate tax include:

1. Government entities and government control entities that a pacifier in the cabinet decision automatically exam from corporate tax in UAE.
2. Public benefit entities if they are listed in a Cabinet decision or exam from corporate tax in UAE
3. Public or private pensions and social security funds, qualifying investment funds are exempt from corporate tax if approved by the federal tax authority.

If your business is a corporation registered for corporate tax, you must cancel its registration before it no longer needs to pay corporate taxes. The Federal Tax Authority (FTA) will cancel your business’s registration if you have submitted all required corporate tax forms, paid all corporate tax debts, and settled any fines until you stop operating.

A natural person undertaking business activity in UAE or a company or a judicial person incorporated in the UAE including free zone person A foreign company, a judicial person that is controlled and managed in UAE, but Inc in a foreign jurisdiction any other person as may be prescribed by the Cabinet and outline and in the Cabinet decision, a resident person is subject to corporate tax on the worldwide income, including income on outside the UAE.

An individual will be a resident if he or she meets the following criteria:

1. If he or she is physically present for more than 183 days within the 12 consecutive months in UAE.
2. If he or she is a UAE national who holds a valet resident permit in the UAE meeting the following criteria:

Suppose he or she resides in UAE, for 183 days within 12 consecutive months. Has businesses or employment in UAE, and possesses a presidency in UAE.

Non-resident persons are entities not considered resident in the UAE.

They include:

1. Entities not incorporated in the UAE and not managed centrally from the UAE.
2. Entities with a Permanent Establishment (PE) in the UAE or deriving income from UAE sources.

Non-resident entities with a PE are subject to a corporate tax rate of 9% on taxable income exceeding AED 375,000 annually.

Non-resident entities must register for corporate tax and submit tax returns within 120 days after the fiscal year ends if they have a PE in the UAE.