UAE Corporate Tax, What Applies to Your Company

This article sets out what applies to you today, and the two reliefs companies most often miss.

The law and the rate

Corporate Tax comes from Federal Decree-Law No. 47 of 2022.

Article 3(1) sets two rates. Taxable income up to AED 375,000 is taxed at 0%. Taxable income above AED 375,000 is taxed at 9%.

A company with AED 800,000 of taxable profit pays:

AED 375,000 at 0%   =        0
AED 425,000 at 9%   =   38,250
Corporate Tax due   =   38,250

You get the 0% band once per tax period. Companies that form a tax group share one band between them, not one each.

Your first tax period is set by your financial year

Your first tax period is your first financial year starting on or after 1 June 2023.

A company with a December year end that existed before June 2023 had a first tax period of 1 January 2024 to 31 December 2024. A company incorporated on 5 June 2023 with a December year end had a first tax period of 5 June 2023 to 31 December 2023, under Article 28 of the Commercial Companies Law.

The FTA sets this out in public clarification CTP003.

Registration was tied to your licence month

Registration deadlines came from FTA Decision No. 3 of 2024, keyed to the month your trade licence was first issued, not to your revenue or your year end.

An expired licence did not excuse you. The FTA's own example covers a company whose licence lapsed in 2022 and never got renewed. It still had to register by reference to the original issue month.

If you have not registered, you are late. Register before you do anything else.

Small Business Relief, and the trap inside it

Small Business Relief treats you as having no taxable income for the period. It applies where revenue does not exceed AED 3,000,000, under Article 21 of the Corporate Tax Law and Article 2(1) of Ministerial Decision No. 73 of 2023.

For the company above, electing the relief takes AED 38,250 to nil.

Two conditions catch people out.

First, you must elect for it in the tax return. File the return without the election and you cannot claim it for that period afterwards.

Second, Article 4 of the same decision cancels your tax losses. Elect the relief in a period where you made a loss and that loss cannot be carried forward at all. Article 5 does the same to net interest expenditure. In a loss year you had no tax to pay regardless, so you give up a future deduction and gain nothing.

The threshold also looks backwards. Once revenue exceeds AED 3,000,000 in any tax period, you cannot elect again, even if revenue falls back below it later. A one-off event counts, including selling a business asset.

Free zone companies follow different rules

A Qualifying Free Zone Person pays 0% on qualifying income and 9% on income that is not qualifying.

Two points get missed. A Qualifying Free Zone Person does not get the AED 375,000 band at 0%. It also cannot use Small Business Relief, tax grouping, qualifying group relief, business restructuring relief, or transfer of tax losses.

A free zone company can elect not to be treated as a Qualifying Free Zone Person under Article 19(1). That opens up the reliefs above. Whether it helps depends on your mix of income.

What this article does not cover

Transfer pricing, exempt income, the participation exemption and the interest deduction limitation rules all change the final number. Non-resident persons cannot use Small Business Relief whatever their revenue.

This is general information on published law, not advice on your position.

What to do next

Check three things. That you are registered. Your revenue against AED 3,000,000. Whether you hold losses worth protecting.

If you want us to run it, our Corporate Tax service is at tax.calx-ae.com.