Frequently Asked Questions (FAQs)

Corporate Tax is a form of direct tax levied on the net income or profit of corporations and other businesses. Corporate Tax is sometimes also referred to as “Corporate Income Tax” or “Business Profits Tax” in other jurisdictions.

Natural persons and juridical persons:
  • 0% for Taxable Income up to and including AED 375,000.
  • 9% for Taxable Income exceeding AED 375,000.

Qualifying Free Zone Persons :
  • 0% on Qualifying Income.
  • 9% on Taxable Income that is not Qualifying Income as specified in Cabinet Decision No. 55 of 2023.

Taxable entities must maintain financial statements to compute their Taxable Income and retain all relevant documents and records backing the information submitted in the Corporate Tax Return or any other filings with the Authority. Exempt entities should uphold records validating their exempt status.

The obligation to arrange and uphold audited financial statements applies to the following entities:
Taxable entities with Revenue surpassing AED 50 million in the applicable Tax Period.
Qualifying Free Zone Entities.

The penalties for non-compliance with corporate tax regulations in the UAE include:

No.	Violation Description	Administrative Fine/Penalty in AED
1	If necessary, information and records are not maintained as per Corporate Tax and Tax Procedures Law, there may be penalty/fine of AED 10,000 per violation	For each violation AED 10,000 and More than 20,000 AED for multiple violations within a 24-month period
2	Not providing information, records, and paperwork in Arabic as requested by the Authority	AED 5,000
3	Failure to submit the deregistration application by the deadline; a fine of AED1,000 each month, up to AED10,000	AED 1,000 each month, up to AED 10,000
4	Failure to notify the Authority of any case necessitating updating tax records	AED1,000 for each infraction, More than AED 5,000 for multiple infractions over a 24-month period
5	The Legal Representative’s failure to announce their appointment	AED 1,000 (from personal funds of the Legal Representative)
6	The Legal Representative’s failure to timely file a tax return	500 AED for each month throughout the first 12 months and AED 1,000 monthly after 1st year (from the funds of Legal Representative)
7	Failure in filing an income tax return on time	AED 500 for the first 12 months AED 1,000 for each month after the 13th months
8	Not paying the payable taxes	A 14% annual monthly penalty on the outstanding amount of payable taxes, beginning the day after the payment deadline
9	Filing an inaccurate Tax Return	AED 500, if it isn’t amended by the deadline
10	Filing a voluntary disclosure regarding mistakes in a tax return, tax assessment, or application for a refund	A one percent monthly penalty on the tax difference, beginning the day after the applicable tax return, tax refund application, or tax assessment deadline
11	Failure to submit a voluntary disclosure knowingly about an audit	1 percent monthly fine imposition in case of Tax Difference, applicable from the filing of refund application.

Expenses incurred in the course of generating Taxable Income in business are deductible, with exceptions and limitations outlined in the Corporate Tax Law. Deduction timing may vary based on expense types and accounting methodologies employed. Expenditure on capital assets is usually recognized through depreciation or amortization deductions spread over the asset’s economic lifespan or benefit period.

For expenses serving dual purposes, such as those for both personal and business use, apportionment is necessary. The relevant portion allocable to the business purpose is treated as incurred solely for the Taxable Person’s business.

The UAE, as a participant in the OECD BEPS Inclusive Framework, is dedicated to tackling international tax jurisdiction challenges. Introducing a Corporate Tax regime provides the UAE with a structure to adopt Pillar Two rules.

Until the adoption of Pillar Two rules by the UAE, multinationals will remain subject to Corporate Tax under the standard UAE Corporate Tax regime.

A ‘juridical person’ refers to an entity established or officially acknowledged under the laws and regulations of the UAE or a foreign jurisdiction, possessing a distinct legal identity apart from its creators, proprietors, and managers. Examples of domestic juridical entities in the UAE encompass a limited liability company, a foundation, an ‘onshore’ trust, a public or private joint-stock company, and other entities endowed with independent legal status under relevant UAE ‘mainland’ legislation or Free Zone regulations.

Whereas, branches of UAE-based or foreign juridical entities within the UAE are viewed as extensions of their ‘parent’ or ‘head office,’ and hence, they do not possess autonomous juridical personality.

Separate legal personality denotes that an entity possesses its own distinct rights, obligations, and liabilities. Consequently, the owners of such an entity typically enjoy limited liability concerning the entity’s debts and obligations.

All activities conducted by a juridical person are considered ‘Business Activities’ and are thus encompassed within the scope of UAE Corporate Tax, unless expressly exempted.

Assessment of this status must be done on a case-by-case basis, considering factors such as the location where key decision-makers, like directors, make strategic decisions impacting the juridical entity.

Yes, however, dividends from domestic shareholdings are unconditionally exempt, and dividends from foreign shareholdings as well as capital gains from both domestic and foreign shareholdings are exempt, contingent upon meeting Participation Exemption criteria.

No, but natural persons operating a Business in the UAE through a sole proprietorship or civil company may be subject to Corporate Tax if engaged in relevant Business or Business Activities.

Transfer pricing regulations aim to ensure that transactions between Related Parties adhere to arm’s length principles, simulating transactions between independent entities. This measure prevents the manipulation of Taxable Income by mandating that transactions with Related Parties and Connected Persons be valued based on their ‘Market Value’ as per various provisions of the Corporate Tax Law.

Transfer pricing regulations apply to UAE businesses engaging in transactions with Related Parties and Connected Persons, regardless of their location, whether within the UAE mainland, Free Zones, or foreign jurisdictions.

Related Parties typically include relatives of a natural person and companies wherein the natural person, alone or with their Related Parties, holds a controlling ownership interest, typically 50% or more of shares.

Similarly, for companies, Related Parties refer to other companies where the company, alone or with their Related Parties, holds a controlling ownership interest, typically 50% or more of shares, or shares greater than 50% common ownership.

Connected Persons differ from Related Parties and include:
The owner of the business.
Directors or officers of the business.
Related Parties of the aforementioned individuals.

Taxable Persons are generally required to use one or more of the following methods:
  • Comparable uncontrolled price method
  • Resale price method
  • Cost-plus method
  • Transactional net margin method
  • Transactional profit split method

Businesses must maintain information regarding transactions with Related Parties and Connected Persons. Some may need to submit this information with their Tax Returns. However, businesses eligible for Small Business Relief are exempt from these rules.
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Businesses must ensure compliance with arm’s length principles for all transactions with Related Parties and Connected Persons.

Generally, transactions within a Tax Group are eliminated in financial consolidation. However, specific cases may require transfer pricing compliance, such as pre-Grouping Tax Losses or individual Tax Group member calculations.

The fourth degree of kinship includes relatives separated by several generations, such as great-great-grandparents or great-great-grandchildren, and first cousins.

A master file provides an overview of a Multinational Enterprise Group’s business, while a local file offers detailed information on specific transactions with Related Parties.

These documents ensure proper consideration of transfer pricing and provide support for compliance with the arm’s length principle.

A Taxable Person must maintain these files if their revenue exceeds AED 200 million or if they are part of a Multinational Enterprise Group with significant revenue.

The arm’s length principle applies to all transactions with Related Parties or Connected Persons from the outset.

Businesses in these sectors may be exempt from UAE Corporate Tax under certain conditions.

These sectors are generally subject to UAE Corporate Tax, with certain exemptions and considerations.

Foreign operators of aircraft and ships may be exempt from UAE Corporate Tax for specific activities related to international transportation.

Businesses engaged in the extraction of the UAE’s Natural Resources and in the non-extractive aspects of the Natural Resources value chain that are subject to Emirate-level taxation will be outside the scope of the UAE Corporate Tax regime, subject to certain conditions and safeguards as specified in Article 7 and Article 8 of the Corporate Tax Law, respectively.

UAE headquartered banks and UAE branches of foreign banks will be subject to UAE Corporate Tax.

Businesses engaged in real estate management, construction, development, agency and brokerage activities will be subject to UAE Corporate Tax.

The asset management and broader financial services sectors will be subject to UAE Corporate Tax, although investment funds that meet certain conditions can apply to be exempt from UAE Corporate Tax. Further, under the Investment Manager Exemption, UAE based and regulated fund managers and other Investment Managers can perform discretionary asset / investment management services without creating a taxable presence in the UAE for their foreign clients.

Income earned by foreign operators of aircrafts and ships will be exempt from UAE Corporate Tax in respect of:

  • providing international transportation of passengers, livestock, mail, parcels, merchandise or goods by air or by sea
  • leasing or chartering aircrafts or ships used in international transportation or
  • leasing or chartering equipment which are integral to the seaworthiness of ships or the airworthiness of aircrafts used in international transportation.

This exemption would only apply where the country of the foreign airline or shipping company would grant a similar exemption to UAE operators of aircrafts and ships.

Small businesses with revenues of AED 3 million or less in both the current and previous Tax Periods can opt for ‘Small Business Relief’ until December 31, 2026. This relief exempts them from being treated as having taxable income during the relevant Tax Period and simplifies their compliance obligations. To claim this relief, businesses must elect for it in their Corporate Tax Return for the respective Tax Period.

Small Business Relief’ exempts eligible businesses from calculating and paying Corporate Tax and relieves them from standard Corporate Tax reporting requirements. Businesses with revenues of AED 3 million or below in the relevant Tax Period and prior periods, ending on or before December 31, 2026, can elect not to treat their income as taxable for that period, thus avoiding the need to calculate taxable income or file a full Corporate Tax Return.

Refer to question 66, ‘Who is eligible to claim Small Business Relief for UAE Corporate Tax purposes?’, for further details on eligibility.

If a business’s revenue surpasses AED 3 million in any Tax Period, it becomes ineligible for Small Business Relief for that period and all future periods.

Until December 31, 2026, any of the following UAE Resident Persons with revenues not exceeding AED 3 million in both the current and previous Tax Periods can claim Small Business Relief:
Natural persons.
Legal entities that are not:
Constituent Companies of a Multinational Enterprise Group operating in multiple countries with a total consolidated group revenue exceeding AED 3.15 billion in each financial period, as defined in Cabinet Decision No. 44 of 2020.
Qualifying Free Zone Persons.
  • If an eligible entity’s revenue exceeds AED 3 million in any Tax Period, it becomes ineligible for Small Business Relief for that period and all future periods.

Revenue refers to the total income generated in a Tax Period from sales of inventory and properties, provision of services, royalties, interest, premiums, dividends, and any other earnings, before deducting any expenses. In the context of income from sales of goods or services, it represents gross revenue without deducting the cost of goods sold or services provided.

For businesses with annual revenues of AED 3 million or less, they can opt for Small Business Relief until December 31, 2026, provided they meet other relevant conditions. In such cases, the business is treated as having no taxable income, and hence no Corporate Tax is payable.

If a Taxable Person with taxable income of AED 1 million is ineligible for or chooses not to opt for Small Business Relief, the Corporate Tax liability is calculated as follows:

Taxable income up to AED 375,000 is taxed at 0%: AED 375,000 x 0% = AED 0.

Taxable income exceeding AED 375,000 is taxed at 9%: (AED 1,000,000 – AED 375,000) = AED 625,000 x 9% = AED 56,250.

Hence, the UAE Corporate Tax liability for the Tax Period would be AED 0 + AED 56,250 = AED 56,250. This liability can be further reduced by available tax credits.

Eligible Taxable Persons can elect for Small Business Relief in their Corporate Tax Return.

My revenue for the current Tax Period is below AED 3 million, but it exceeded AED 3 million in the previous Tax Period – am I eligible for Small Business Relief?

No, once your revenue surpasses AED 3 million in a Tax Period, you become ineligible for Small Business Relief for both the current and future Tax Periods.

Note that the AED 3 million threshold for Small Business Relief applies to Tax Periods ending on or before December 31, 2026.

Yes, you can. As long as your revenue didn’t surpass AED 3 million in previous tax periods, you can elect for Small Business Relief for the current tax period, provided you fulfill all relevant conditions.

Businesses opting for Small Business Relief can benefit from various compliance reliefs apart from not having taxable income.

Businesses availing Small Business Relief won’t need to file transfer pricing documentation. This exemption covers both the obligation to submit a transfer pricing information disclosure form with a tax return and the necessity to maintain a master file and a local file. However, businesses must still adhere to transfer pricing regulations, ensuring transactions with related parties adhere to the arm’s length principle.

The Corporate Tax Law delineates between unincorporated and incorporated partnerships.
Unincorporated Partnerships’ (as defined by the Corporate Tax Law) represent a contractual bond between two or more individuals, rather than constituting a separate legal entity distinct from its partners/members. Unincorporated Partnerships are deemed ‘transparent’ for UAE Corporate Tax purposes. This implies that an Unincorporated Partnership is not individually subject to UAE Corporate Tax. Instead, each partner is liable for UAE Corporate Tax based on their portion of the income derived from the partnership’s activities.

Incorporated partnerships encompass limited liability partnerships, partnerships limited by shares, and other partnership models where none of the partners carry unlimited liability for the partnership’s obligations or the actions of other partners. Such partnerships are subject to Corporate Tax akin to corporate entities.

An Unincorporated Partnership arises through a contractual agreement between two or more individuals, such as a partnership or trust, under UAE legislation.

A written agreement is not obligatory. An Unincorporated Partnership may arise from a verbal agreement or the conduct between involved parties.

Unless an application is submitted for independent Taxable Person status, an Unincorporated Partnership will be treated as tax transparent.

Consequently, the Unincorporated Partnership itself will not be subject to Corporate Tax. Instead, individual partners will be taxed based on their share of the partnership’s income.

Income and expenses of the tax-transparent Unincorporated Partnership are allocated to each partner proportionally based on their distributive share in the partnership. This distribution typically aligns with the partnership contract. When a partner’s distributive share cannot be identified, allocation follows guidelines set by the Federal Tax Authority.

A minimum of two partners is required, with no maximum limit.

Partners in an Unincorporated Partnership can apply to the Federal Tax Authority for independent Taxable Person treatment. Upon approval, the partnership’s profits will be directly taxed, rather than passing through to individual partners. This application is generally irreversible, except under extraordinary circumstances subject to Federal Tax Authority approval.

Individuals involved in a Business or Business Activity through an Unincorporated Partnership are individually subject to UAE Corporate Tax on their share of partnership income. Hence, partners in such partnerships must register for UAE Corporate Tax and fulfill Corporate Tax Law obligations.

Partners in an Unincorporated Partnership can petition the Federal Tax Authority to treat the partnership as a distinct Taxable Person for UAE Corporate Tax purposes. Upon approval, one partner is designated responsible for filing Corporate Tax Returns on behalf of the partnership.

Juridical persons involved as partners in Unincorporated Partnerships, already registered for Corporate Tax as Resident or Non-Resident Persons, do not require additional Corporate Tax Registration.

For UAE Corporate Tax purposes, Foreign Partnerships are typically considered Unincorporated Partnerships if they meet specific criteria, including non-tax status in their respective foreign jurisdiction.

While conceptually different—a Foreign Partnership is established in a foreign jurisdiction, while an Unincorporated Partnership is formed under UAE laws—a Foreign Partnership can be treated as an Unincorporated Partnership for UAE Corporate Tax purposes, given it satisfies certain conditions.

Yes, the UAE has officially enacted the global minimum tax framework under the OECD Pillar Two rules by introducing a Domestic Minimum Top-up Tax (DMTT). Effective for financial years starting on or after January 1, 2025, in-scope large multinational enterprises are subject to a minimum effective tax rate of 15% on their UAE-sourced profits. This ensures that any tax liability falling below the 15% threshold is topped up locally within the UAE.

A multinational corporation operates in its home country and other countries through subsidiaries, branches, or other forms of presence/registration. Merely earning foreign-sourced income without a foreign presence or registration doesn’t classify a business as a multinational corporation.

In the context of the global minimum effective tax rate under the OECD Base Erosion and Profit Shifting (BEPS) Pillar Two framework, a ‘large’ multinational is defined as an enterprise group that achieves consolidated global revenues equal to or exceeding EUR 750 million (or the local currency equivalent) in at least two of the four preceding fiscal years.

A Qualifying Investment Fund refers to an entity primarily engaged in issuing investment interests to raise capital, pooling investor funds, or establishing joint investor funds. The objective is to enable investors holding such interests to derive profits or gains from the entity’s activities related to acquiring, managing, holding, or disposing of investments. These qualifications are subject to meeting conditions outlined in Article 10 of the Corporate Tax Law.

Under the updated framework established by Cabinet Decision No. 34 of 2025, Qualifying Investment Funds (QIFs) are treated as exempt entities for UAE Corporate Tax purposes rather than being viewed as inherently tax-transparent vehicles. Corporate entities or partnership funds seeking this exemption must formally apply to the Federal Tax Authority (FTA) and satisfy the revised criteria. Alternatively, investment funds structured as juridical partnerships can apply for the “Qualifying Limited Partnership” (QLP) regime to maintain a structurally tax-neutral status where income flows directly to investors.

A Recognised Stock Exchange encompasses UAE-based exchanges licensed and regulated by relevant authorities (e.g., Nasdaq Dubai, Abu Dhabi Securities Exchange, Dubai Financial Market) and foreign exchanges of equivalent standing to those in the UAE.

UAE-resident investment fund managers or those operating within the UAE through a Permanent Establishment are subject to UAE Corporate Tax on their earned income.

Either the investment fund or its manager must be subject to regulatory oversight to qualify for the Corporate Tax exemption, not necessarily both.

Under the ‘Investment Manager Exemption,’ regulated UAE Investment Managers can provide services to foreign funds and clients without creating a taxable presence in the UAE, given specific conditions are met.

If the conditions of the Investment Manager Exemption are met, a UAE-based Investment Manager should not cause foreign investment funds or vehicles to be considered resident in the UAE for Corporate Tax purposes.

Wholly-owned UAE investment holding companies and special purpose vehicles (SPVs) utilized by Qualifying Investment Funds may apply for exemption from UAE Corporate Tax through the Federal Tax Authority.

To protect the integrity of the exemption, diversity of ownership thresholds apply. A single investor and its related parties cannot own more than 30% of the fund (if there are fewer than 10 investors) or 50% of the fund (if there are 10 or more investors). Additionally, if a QIF’s holding of UAE immovable property exceeds 10% of its total assets, or if ownership thresholds are breached, juridical investors may become liable to tax on their pro-rated share of that income, even though the fund itself remains exempt. Newly established funds have a grace period covering their first two financial years to meet these ownership conditions, provided they demonstrate a clear intent to comply.

According to FTA Decision No. 8 of 2025, funds approved as Exempt Persons must submit an annual confirmation declaration within 10 months of their financial year-end. Furthermore, to safeguard their exempt status, investment managers must fulfill information reporting obligations by providing investors with all necessary financial data to calculate or adjust their taxable income within 6 months of the financial year-end.

The UAE Corporate Tax regime exempts specific types of income to avoid double taxation and maintain competitiveness:
  • Dividends and other profit distributions received from UAE-incorporated or resident legal entities (automatically exempt).
  • Dividends and profit distributions received from a Participating Interest in a foreign legal entity (subject to the Participation Exemption rules).
  • Capital gains, foreign exchange gains/losses, and impairment gains/losses derived from a qualifying domestic or foreign Participating Interest.
  • Income from a foreign branch or Foreign Permanent Establishment, if the taxpayer elects to claim the ‘Foreign Permanent Establishment Exemption’.
  • Income earned by non-residents from operating or leasing aircraft or ships in international transportation, subject to reciprocal conditions.

Dividends and other profit distributions from a foreign legal entity are exempt *only* if the investment qualifies as a ‘Participating Interest’ under the Participation Exemption regime. To qualify, the UAE entity must either hold a 5% or greater ownership stake, or the historical acquisition cost of the investment must be at least AED 4,000,000. Additionally, the foreign entity must satisfy specific regulatory criteria.

Capital gains derived from the sale or disposal of a Participating Interest in both domestic and foreign legal entities are fully exempt under the Participation Exemption regime. Furthermore, Corporate Tax relief is available for capital gains arising from qualified intra-group transfers, organizational mergers, and restructuring transactions. Capital gains outside these specific categories are treated as ordinary commercial income and are subject to the standard 9% corporate tax rate.

The Participation Exemption regime prevents double taxation on corporate groups by exempting corporate profits that have already been taxed at the subsidiary level. To benefit from this exemption on dividends, capital gains, or liquidation proceeds, the UAE shareholder must hold a ‘Participating Interest’ (a minimum 5% equity share or an investment with an acquisition cost of at least AED 4,000,000) for an uninterrupted period of at least 12 months (or have the intent to hold it for 12 months). The foreign subsidiary must also satisfy the ‘subject to tax’ test.

Yes. Under Ministerial Decision No. 302 of 2024, the historical acquisition cost threshold acts as an absolute alternative. If a UAE business makes a strategic minority investment where the ownership interest is less than 5% (or falls below 5% due to dilution), the ownership requirement is legally met as long as the total acquisition cost is AED 4 million or higher, provided all other statutory conditions are fulfilled.

No, dividends received from a UAE resident company do not need to qualify for the Participation Exemption. Under Article 22 of the Corporate Tax Law, domestic dividends and profit distributions are automatically exempt from Corporate Tax unconditionally, regardless of the shareholding percentage or holding period.

Ministerial Decision No. 302 of 2024 explicitly clarifies that the ‘subject to tax’ test focuses on the **statutory (headline) tax rate** of the foreign subsidiary’s country of residence, which must be at least 9%. If a foreign country applies a 12% statutory rate but local tax holidays lower the subsidiary’s effective tax rate to 7%, the test is still successfully met. Alternatively, a company can satisfy the test by proving an actual effective tax rate of 9% or higher during the relevant period, or by qualifying under specific carve-outs for specialized holding company structures.

The minimum ownership rule is met if a Taxable Person holds a 5% or greater equity interest, or if the historical investment value is at least AED 4 million. To determine eligibility, different types of ownership interests held by the Taxable Person in the same entity are aggregated. Furthermore, equity interests held by separate members of the same Qualifying Group can be pooled together to meet the minimum threshold.

An ownership interest includes ordinary shares, preferred shares, capital contributions, founders’ shares, or other equity rights that entitle the holder to a share of profits and liquidation proceeds. Crucially, these instruments must be explicitly classified as equity under International Financial Reporting Standards (IFRS) or equivalent recognized accounting principles.

A UAE-based branch of a foreign company can claim the Participation Exemption if the branch itself constitutes a taxable Permanent Establishment in the UAE and the ownership interest in the foreign or domestic target entity is legally and functionally attributed to that branch. All other standard conditions of the regime must be concurrently met.

Option rights to acquire shares can count toward an ownership interest for the Participation Exemption purposes *only if*, under International Financial Reporting Standards (IFRS), both substantial control and the dynamic rights to the beneficial ownership of the underlying shares reside with the option holder prior to exercise.

Yes. Shariah-compliant Islamic financial instruments (such as certain Sukuk or equity-based Mudarabah structures) can fully benefit from the Participation Exemption, provided they are classified as equity under the accounting standards issued by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and meet the standard duration and valuation thresholds of the regime.