The introduction of Federal Corporate Tax (CT) on June 1, 2023, marks a new era for businesses in the United Arab Emirates. While aligning with global standards, the UAE regime is designed to preserve its competitive edge. At Lexoro Solutions, we help businesses like yours understand and adapt to this change, turning compliance into a strategic advantage.
This guide breaks down the essentials of the UAE Corporate Tax law.
What is the UAE Corporate Tax?
Corporate Tax is a direct tax levied on the net profit of companies and other businesses. It applies to:
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UAE-incorporated companies.
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Legal entities effectively managed and controlled within the UAE.
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Non-resident companies with a Permanent Establishment (PE) in the UAE.
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Key Insight: Qualifying Free Zone Persons can benefit from a 0% CT rate on qualifying income, maintaining the UAE’s appeal as a global hub.
Key Features at a Glance
| Feature | Details for Your Business |
|---|---|
| Effective Date | For financial years starting on or after 1 June 2023. |
| Standard Tax Rate | 9% on taxable income exceeding AED 375,000. A 0% rate applies to taxable income up to this threshold. |
| Free Zone Incentives | Qualifying Free Zone Persons (QFZPs) meeting specific conditions can benefit from a 0% CT rate on “Qualifying Income.” |
| Exemptions | Certain entities and types of income are exempt, requiring careful analysis to optimize your tax position. |
Virtually all business forms in the UAE are within the scope of CT, including mainland LLCs, Free Zone entities, and individuals conducting licensed business activities. Understanding your entity's classification is the first step to compliance.
Your Compliance Roadmap
To avoid penalties, businesses must:
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Register with the Federal Tax Authority (FTA) and obtain a Tax Registration Number.
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Maintain accurate financial records compliant with international accounting standards.
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File an annual Corporate Tax return within 9 months of the end of your financial period.
Strategic Implications for Your Business
The introduction of CT makes proactive tax planning essential. Businesses must review their structures, assess the deductibility of expenses, and understand the specific conditions for free zone benefits. This is not just about compliance—it’s about financial optimization.
Partner with Lexoro’s Corporate Tax Experts – Ensure your business is fully compliant and strategically positioned under the new UAE CT law. Let us handle the complexity so you can focus on growth.
