In January 2022, Ministry of Finance announced that it will introduce federal Corporate tax (CT) on the net profits of businesses. Corporate tax is a form of direct tax levied on the net income or profit of corporations and other entities from their business.
According to the UAE Federal Decree-Law No. 47 of 2022 on taxation of corporations and businesses (the “Corporate Tax Law”), businesses will become subject to UAE Corporate Tax from the beginning of their first financial year that starts on or after 1 June 2023.
CT will apply to:
- All businesses and individuals conducting business activities under a commercial licence in the UAE
- Free zone businesses (The UAE CT regime will continue to honour the CT incentives currently being offered to free zone businesses that comply with all regulatory requirements and that do not conduct business set up in the UAE’s mainland.)
- Foreign entities and individuals only if they conduct a trade or business in the UAE in an ongoing or regular manner
- Banking operations
- Businesses engaged in real estate management, construction, development, agency and brokerage activities
Corporate Tax FAQs
A. Corporate Tax – Overview
- What is CT?
CT is a form of direct tax levied on the net income or profit of corporations and other businesses. CT is sometimes also referred to as “Corporate Income Tax” or “Business Profits Tax” in other jurisdictions.
- Why is the UAE introducing CT?
A competitive CT regime based on international best practices is expected to cement the UAE’s position as a leading global hub for business and investment and accelerate the UAE’s development and transformation to achieve its strategic objectives.
Introducing a CT regime also reaffirms the UAE’s commitment to meeting international standards for tax transparency and preventing harmful tax practices.
- Is the UAE the first country to introduce CT?
Most countries in the world have a comprehensive CT regime, including most of the countries in the Middle East.