Key Points on the Introduction of Corporate Tax in the UAE

For the first time in its history, starting in 2025, the United Arab Emirates will incorporate taxation on business income, with the rates established at 0% and 9%.

The legislative basis of a federal corporate tax was introduced by the Corporate Tax Law of December 9, 2022. Corporate taxation will be applied for financial years starting on or after June 1, 2023 for businesses whose income exceed AED 375,000 (USD 95,000).

Registration as a taxpayer

Taxpayers are required to register for corporate tax by creating a profile and submitting a corporate tax registration application to the Federal Tax Authority.

Residents must register as such by specific dates, depending on the month their trade licence was issued (irresponsible of the year of issuance):

Taxation for non-residents will be based on the income associated with their UAE permanent establishment or nexus (center of interests). If a permanent establishment was created before March 1, 2024, the deadline for registration is 9 months from the date of its registration, and 3 months if a permanent establishment was created after March 1, 2024. If the nexus is established before March 1, 2024, the deadline for registration is 3 months starting from March 1, 2024; if after – 3 months from the date of establishment of the nexus.

All taxable persons must submit their corporate tax registration application. Failure to do so within the deadlines may result in an administrative fine of AED 10,000 (USD 2,500).

Exemption from corporate tax

The list of exempted entities includes government entities and government-controlled entities. The following types are also stipulated:

• Extractive businesses in the UAE;

• Non-extractive natural resource businesses in the UAE;

• Qualifying public benefit entities;

• Qualifying investment funds;

• Public and private pension or social security funds;

• Wholly-owned and controlled UAE subsidiaries of certain exempt entities.

Tax relief

Small businesses

Businesses with revenues less than AED 3 million for the latest and all previous tax periods can make uses of a small business relief. It will be available for tax periods that end before or on December 31, 2026.

To be qualified for a relief, a small business must:

• Be a resident person in the UAE;

• Have revenue for the relevant tax period and previous tax periods of not over AED 3 million;

• Be not a financial institution or a holding company.

Qualifying Free Zone Persons

Qualifying free zone persons (QFZPs) may benefit from the 0% corporate tax rate on their qualifying income. For this, a QFZP must:

• Prove its substance in the UAE;

• Earn the amount income, derived from transactions with other free zone persons and qualifying activities;

• Comply with the transfer pricing rules and documentation requirements;

• Prepare audited financial statements in accordance with the IFRS.

Filing of corporate tax

Companies must submit their first tax returns and pay corporate tax due within 9 months after the end of the relevant tax period.

For the companies with a fiscal year that ends on December 31, the first taxable period will last from January 1, 2024 to December 31, 2024. The deadline for the first corporate tax return is September 30, 2025.

Businesses will also be required to maintain all relevant records and documents for 7 years following the end of the tax period to which they relate, in order to conduct any possible necessary audits.

Introduction of e-invoicing in 2026

Additionally, the Ministry of Finance of the UAE has informed of the plans to introduce real-time exchange of invoices and seamless digitalized tax reporting to the UAE Federal Tax Authority.

Tax bodies will develop a structured form of an invoice data issued and exchanged electronically between a supplier and a buyer and reported electronically. This will help to save on costs and time needed for the processing of corresponding documents.

As of now, the accreditation for service providers for the initiative is taking place; legislative basis will be introduced in 2025. The launch of the technical platform in expected in 2026.

Sources:

UAE Federal Tax Authority

UAE Ministry of Finance