UAE Corporate Tax

Tax Consultancy in UAE

UAE Corporate Tax

The United Arab Emirates—home to the major corporate hub of Dubai—continues to offer one of the most competitive corporate tax rates globally. This initiative aligns with the UAE’s commitment to international tax standards, mirroring similar reforms across the Gulf region. At the same time, it aims to ease regulatory pressures on businesses while supporting small enterprises and start-ups.

Earnest Consultants helps you stay compliant with the corporate tax framework in Dubai, which applies to all businesses and commercial activities across the UAE.

Introduction of Corporate Tax in the UAE

On January 31, 2022, the United Arab Emirates (UAE) announced the introduction of a federal Corporate Tax (CT) on business profits, effective for financial years starting on or after June 1, 2023. This new regime has been designed in line with global best practices, aiming to minimize the compliance burden for UAE businesses while ensuring international alignment.

Effective Date

The Corporate Tax will apply to financial years beginning on or after June 1, 2023.

Proposed Corporate Tax Rates
  1. 0% on taxable income up to AED 375,000

  2. 9% on taxable income exceeding AED 375,000

  3. Multinational corporations that fall under the OECD BEPS 2.0 Pillar Two framework (with global revenues exceeding AED 3.15 billion) will be subject to different rates as per the global minimum tax rules.

Why Is the UAE Introducing Corporate Tax?
  1. To reinforce the UAE’s position as a leading global business and investment hub

  2. To support economic diversification and reduce reliance on oil revenues

  3. To meet international tax transparency standards

  4. To eliminate harmful tax practices

  5. To support the UAE’s long-term strategic objectives and global competitiveness

Scope of Corporate Income Tax (CIT)

The UAE’s federal corporate tax applies to all business and commercial activities across the emirates, except:

  1. Natural resource extraction, which remains taxed at the emirate level (up to 55%)

  2. Branches of foreign banks, taxed at 20% under existing emirate-level regulations

Corporate tax applies to all legal entities conducting commercial, industrial, or professional activities in the UAE. Free Zone businesses must comply with regulatory requirements and avoid direct trade with the UAE mainland to maintain preferential tax treatment.

Income Exempt from Corporate Tax

Certain types of income will be exempt from CIT, including:

  1. Dividends, capital gains, interest, royalties, and investment income earned by foreign investors

  2. Dividend income from qualifying shareholdings by UAE companies (specific criteria to be defined in the law)

  3. Intra-group transactions and group restructuring gains

  4. Income from natural resource activities

  5. Profits earned by foreign bank branches

  6. Foreign entities and individuals not engaged in regular business activity in the UAE

Impact on Foreign Direct Investment (FDI)

The introduction of corporate tax is part of the UAE’s broader strategy to evolve into a modern, diversified economy. The move aligns with global tax standards and supports the nation’s ambition to become a hub for technology, innovation, and talent.

Recent reforms reflect this shift:

  1. Overhaul of labor laws

  2. Removal of the 51% UAE national ownership requirement for mainland companies

  3. Transition of the official workweek to Monday–Friday

While the cost of doing business may rise, the UAE remains attractive due to zero personal income tax, no tax on personal investments, and a business-friendly environment. These reforms aim to strengthen long-term economic sustainability while attracting high-skilled professionals and international investors.

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