Corporate Tax in UAE: Everything You Need to Know — Compliance, Rates, Exemptions & How Wafeq Simplifies It All



You’ve spent years growing your company in the UAE, navigating markets, managing teams, and building trust. Today, a new chapter begins with the introduction of corporate tax. It's not just another rule; it’s a shift in how businesses think, plan, and operate. The UAE’s decision to implement corporate tax raises questions that exceed the numbers: How will this impact your profits, compliance, and plans? Whether you're a startup founder or CFO of a growing enterprise, understanding corporate tax is now essential to staying ahead.

A New Era for UAE Businesses

On June 1, 2023, the UAE launched its first federal corporate tax under Federal Decree‑Law No. 47 of 2022, imposing a 9% tax on taxable income exceeding AED 375,000 annually.

This marked a historic shift in the UAE’s taxation framework, transitioning from a zero-tax regime (except for oil companies and foreign banks) to a structured system applicable to most business entities. The move aims to support the country’s economic diversification strategy and meet international commitments, including the OECD's Base Erosion and Profit Shifting (BEPS) project.

Companies in the UAE must now review their financial year start dates to determine when their corporate tax obligations begin. This guide walks you through:

• Who is eligible and when?
• Key mechanics, rates, exempt income, free‑zone rules, and filing.
• International rules like Pillar Two (global minimum tax)
• And importantly, how Wafeq is built to manage UAE Corporate Tax seamlessly, without detours or workarounds.

What is Corporate Tax & Why does it matter in the UAE?

Corporate tax is a direct tax on the net income of businesses and entities. It became applicable, either from 1 June 2023 or 1 January 2024, depending on a company’s financial year.

The United Arab Emirates introduced a federal corporate tax system as part of its strategic plan to align with global tax standards and enhance transparency. The Corporate Tax Law, Federal Decree-Law No. 47 of 2022, was officially issued on December 9, 2022. It came into effect for financial years starting on or after June 1, 2023.

This marked a historic shift in the UAE’s taxation framework, transitioning from a zero-tax regime (except for oil companies and foreign banks) to a structured system applicable to most business entities. The move aims to support the country’s economic diversification strategy and meet international commitments, including the OECD's Base Erosion and Profit Shifting (BEPS) project.

The UAE government's keeping its corporate tax-free status is no longer possible, and small businesses must adapt to new compliance requirements.

Who is Subject to Corporate Tax?

Corporate tax in the UAE applies to a broad range of legal entities and individuals engaged in business activities. Under the Corporate Tax Law, the following are subject to tax:

• UAE-incorporated companies (including mainland and free zone entities, with exceptions for Qualifying Free Zone Persons)
• Foreign legal entities with a permanent establishment in the UAE.
• Individuals conducting business or commercial activity in the UAE under a commercial license.
• Partners in unincorporated partnerships, to the extent of their share in the taxable income.
• Trusts and foundations that carry out business activities.

Exempt Income, Free Zones & Tax Exempt Entities

Not all income types are subject to corporate tax in the UAE. The tax regime outlines several categories of exempt income, which help reduce the tax burden on businesses and promote investment and global competitiveness.

Certain entities are exempt, including:

• Government & sovereign entities.
• Public benefit entities.
• Extractive industries.
• Some investment and pension funds.
• Wholly government‑owned companies, etc.

Key Types of Exempt Income:

These exemptions are designed to prevent double taxation and ensure that UAE-based businesses remain attractive to investors and global partners.

• Dividends and profit distributions received by UAE businesses from domestic and foreign entities.
• Capital gains from the sale of shares or other ownership interests (subject to conditions)
• Income from a foreign permanent establishment of a UAE business, if chosen to be exempt.
• Intra-group transactions and restructurings are provided, as long as specific requirements are met.

Free Zone Tax Treatment

The UAE’s Free Zones have long been a hub for international investment and tax-efficient business setups. Under the new Corporate Tax regime, Free Zone businesses continue to benefit from favorable tax treatment, provided they meet specific conditions.

Qualifying Free Zone Persons enjoy 0% corporate tax on qualifying income, notably income from free zone to overseas/domestic businesses. However, free zone companies still must register and file returns. They also must meet substance requirements such as local management, employees, and premises. Also, meeting the following conditions:

• The entity is a Qualifying Free Zone Person.
• It maintains adequate economic substance in the Free Zone.
• It does not elect to be subject to the regular Corporate Tax rate.
• It derives income that qualifies under Cabinet Decision No. 100 of 2023 and Ministerial Decision No. 265 of 2023.

What Are the Corporate Tax Rates in the UAE?

Corporate tax in the UAE applies to a broad range of legal entities and individuals engaged in business activities. Under the Corporate Tax Law, the following are subject to tax:

• 0% on taxable income up to AED 375,000.
• 9% on taxable income exceeding AED 375,000.
• Global Minimum Tax (Pillar Two, DMTT) Starting January 2025, the UAE has implemented a 15% Domestic Minimum Top-up Tax (DMTT) on large Multinational Enterprises (global revenue ≥ EUR 750M) under OECD Pillar Two guidelines. Expected tax credits or incentives (e.g., R&D credits) may roll out subject to legislation.

This tiered structure helps small and medium-sized businesses by extending an exemption on lower earnings while applying a moderate rate on higher profits. The 0% threshold supports entrepreneurship and startups; this is a key part of the UAE’s economic vision.

• For Qualifying Free Zone Persons, a 0% corporate tax rate may still apply to income derived from qualifying activities, subject to specific conditions outlined by the Federal Tax Authority (FTA).
• Capital gains, dividends, or profits from group reorganization and intra-group transactions are exempt from corporate tax, provided certain conditions are met.

UAE Corporate Tax Registration and Compliance Process

To comply with the Corporate Tax regime, Businesses operating in the UAE must complete specific registration steps and adhere to ongoing compliance requirements. This process ensures transparency and aligns with global best practices in tax administration.

Registration Process:

• All taxable persons (including Free Zone entities, where applicable) must register for Corporate Tax with the Federal Tax Authority (FTA).
• Registration is done via the EmaraTax platform.
• Businesses are encouraged to register as early as possible to avoid administrative penalties.
• A Tax Registration Number (TRN) will be issued upon approval.

Also Read: Understanding the VAT Tax Number in UAE.

Compliance Requirements:

The UAE’s streamlined approach ensures that businesses can meet their tax obligations without undue burden while upholding international transparency and compliance standards.

• Maintain accurate accounting records and books as per applicable regulations.
• Prepare and submit the annual Corporate Tax returns electronically through the FTA portal.
• Payment of due taxes must be made within the timeframe specified by the FTA (usually within 9 months of the end of the financial year).
• As per OECD standards, Businesses that engage in related party transactions must maintain transfer pricing documentation.

Transfer Pricing, Tax Groups & International Tax Rules

Transfer pricing rules in the UAE are aligned with the OECD Guidelines and apply to transactions between related parties and connected persons. Businesses must ensure that their related-party transactions comply with the arm’s length principle, meaning that prices charged between related entities should mirror those that would be charged between independent parties under similar conditions.

Companies engaged in cross-border or intercompany transactions are required to maintain transfer pricing documentation, which includes:

• Master File: An overview of the multinational group’s global operations.
• Local File: Detailed information on specific intercompany transactions relevant to the UAE entity.
• Disclosure Form: Submitted with the tax return summarizing related-party dealings.

Tax Losses

Corporations can carry forward tax losses indefinitely, subject to conditions. Loss relief is available within qualifying groups and M&A restructures.

Tax Groups

The UAE allows eligible businesses to form a tax group for Corporate Tax purposes, enabling them to file a single tax return on behalf of the group. This structure is particularly beneficial for holding companies and large groups with multiple subsidiaries. To qualify as a tax group:

• All members must be UAE resident juridical persons.
• The parent company must own at least 95% of the share capital, voting rights, and profits of the subsidiaries.
• None of the entities should be an exempt or free zone person (unless conditions are met).

International Tax Rules

Even businesses operating only in the UAE are interested in how the UAE tax system interacts with:

• Double Tax Treaties.
• Foreign tax credit mechanisms.
• Permanent establishment (PE) rules
• Global Minimum Tax (BEPS Pillar Two)

Filing & Deadlines

Staying on top of your corporate tax filing and payment deadlines is essential to avoid penalties and ensure compliance. The UAE’s tax system sets clear expectations for when returns must be filed and payments made, making proper planning a key part of any business’s financial operations.

• Annual CT return must be filed within 9 months of the financial year end. Example: FY ending 31 May 2024 → file by 28 Feb 2025; FY ending 31 Dec 2024 → file by 30 Sept 2025.
• Filing must be done via the Emara Tax portal, integrated system with UAE PASS and federal systems.
• Even exempt businesses must file simplified declarations.

How Wafeq Delivers Seamless Corporate Tax Compliance

Built-in vs. Bolt-on Tax Logic

Unlike legacy systems that force rigid account-level tagging or duplication, Wafeq offers:

• Default tax treatment at the chart‑of‑accounts level, and
• Editable tax treatment at each line item, allowing flexibility per transaction without restructuring accounts.

No workarounds, tax logic runs naturally within your normal workflow.

Key Features:

• Account-level defaults: assign deductible, non-deductible, or exempt to each account.
• Smart system default: 100% deductible for expenses, 0% exempt for revenue if not configured.
• Line-level overrides: adjust tax treatment when booking bills, invoices, or journals without changing accounts.

All data flows into the Corporate Tax – Taxable Income report, which you can filter (period/month/year) and export (PDF/Excel, Arabic/English). It calculates Net profit less exempt income, adds non-deductible expenses to the Final taxable income, and is ready for submission.

Wafeq Technical Guide Outline

1. Set Default Treatment (Chart of Accounts) Navigate → Accountant → Chart of Accounts → select account → assign default treatment.



2. Create a Transaction Create invoice/bill → choose account per line → default fills in → override if needed.



3. Manual Journal Entries Under Accountant → Manual Entries → assign treatment per journal line.



4. Corporate Tax Report Reports → Corporate Tax – Taxable Income → adjust date/view → export.







Real‑World Scenarios — Why Wafeq Stands Out

Here are examples where Wafeq’s flexibility handles complexity elegantly:

• One invoice, multiple treatments: Hotel bill includes buffet lunch (50% deductible), meeting room (100%), parking (non-deductible). Wafeq handles this in a single bill using line-level overrides.
• Same revenue account, different rules: Dividend income from UAE subsidiary (taxable) and foreign subsidiary (exempt), book under one account, mark lines differently.
• Single product, multiple client types: Subscriptions to UAE clients (taxable) and free zone clients (exempt) recorded under the same account; tax treatment differs per line.

Example Tax Calculation



Know more about: How to register corporation tax in the UAE.

Why Wafeq Is Trusted

The UAE corporate tax framework requires accurate bookkeeping, proper documentation, and timely filings. Wafeq is designed to meet these demands—without the manual workarounds or risks of error.

From system setup to generating audit-ready reports, Wafeq helps businesses:

• Stay compliant with the UAE’s corporate tax laws. Wafeq is purpose-built for compliance—it avoids rigid, error-prone workarounds.
• Maintain clear, well-organized financial records.
• Submit accurate returns on time.
• Easily adapt to threshold changes and documentation needs.

FAQs about UAE Corporate Tax

What is the effective date of UAE Corporate Tax?

The UAE Corporate Tax came into effect on 1 June 2023. Businesses whose financial year starts on or after this date are subject to the new tax regime.

What is the corporate tax rate in the UAE?

• 0% on taxable income up to AED 375,000
• 9% on taxable income exceeding AED 375,000
• 15% for certain large multinationals under OECD Pillar Two rules (if applicable)

What are tax groups, and who can form them?

A tax group is a group of UAE-resident entities that can file a single tax return. To qualify:

• One entity must own ≥95% of the others.
• All must be UAE residents and non-exempt.
• Grouping simplifies compliance.

Do companies need to file tax returns?

Yes. All taxable persons must register for Corporate Tax and file annual tax returns, regardless of whether any tax is payable.

Are there penalties for non-compliance?

Yes. The UAE imposes administrative penalties for late registration, late filing, incorrect returns, and failure to maintain documentation.