UAE Corporate Tax Explained: Who Must Register and How It Works

June 1, 2023, marked a historic turning point for the UAE economy with the introduction of a Federal Corporate Tax. This new regime aims to align the UAE with international tax standards and reduce the country's reliance on oil revenue. While the introduction of a new tax can be intimidating, the UAE’s Corporate Tax system is designed to be one of the most competitive and business-friendly in the world.

In this guide, we break down everything you need to know about UAE Corporate Tax, including registration requirements, tax rates, exemptions, and crucial deadlines.

1. What is the UAE Corporate Tax Rate?

The UAE has implemented a tiered Corporate Tax (CT) structure to support small businesses and startups while ensuring that larger corporations contribute fairly.

• 0% Tax Rate: Applies to taxable income up to AED 375,000. This threshold ensures that the vast majority of small and medium-sized enterprises (SMEs) pay zero tax on their initial profits.
• 9% Tax Rate: Applies to taxable income exceeding AED 375,000. This rate is significantly lower than the global average, maintaining the UAE’s status as a highly attractive business hub.
• Alternative Rates for Large Multinationals: Under Pillar Two of the OECD BEPS project, large multinational corporations (with consolidated global revenues exceeding EUR 750 million) may be subject to a different tax rate, which the UAE is currently finalizing.

2. Who Must Register for Corporate Tax?

Virtually all business entities in the UAE are required to register for Corporate Tax, even if they expect to fall below the 0% threshold.

Taxable Persons

• Juridical Persons: This includes all UAE-incorporated companies such as LLCs, PJSCs, and Private JSCs, as well as foreign companies that have their effective management and control in the UAE.
• Natural Persons: Individuals who conduct business or commercial activities in the UAE (e.g., freelancers with a permit) are also subject to Corporate Tax if their annual turnover from such activities exceeds AED 1 million.
• Free Zone Persons: Companies in Free Zones are also required to register. However, "Qualifying Free Zone Persons" can continue to benefit from a 0% tax rate on their qualifying income if they meet specific conditions.

Exempt Persons

Certain entities are automatically exempt or can apply for exemption, including:

• Government and government-controlled entities.
• Extractive businesses (oil and gas), which are subject to emirate-level taxation.
• Public benefit organizations and charities.
• Qualifying investment funds.

3. The Registration Process via EmaraTax

All businesses must obtain a Corporate Tax Registration Number (CTRN) from the Federal Tax Authority (FTA).

When to Register?

The FTA has released a timeline for registration based on the month of your original trade license issuance. For example, businesses with licenses issued in January or February were required to register by May 31, 2024. Failure to register by the assigned deadline carries a penalty of AED 10,000.

Step-by-Step Registration

1. Access the Portal: Log in to the EmaraTax portal using your existing VAT credentials or create a new account.
2. Setup Taxable Person Profile: Enter your business details, trade license information, and ownership structure.
3. Upload Documentation: You will need a copy of your Trade License, Passport and Emirates ID of the owners, and the company's Memorandum of Association (MOA).
4. Submit and Monitor: Once submitted, the FTA typically reviews the application within 20 business days. Upon approval, you will receive your CTRN.

4. How Taxable Income is Calculated

Corporate Tax is calculated on the "Accounting Net Profit" as shown in your financial statements, with certain adjustments allowed by the law.

• Revenue vs. Profit: Tax is paid on net profit (revenue minus allowable business expenses), not on total turnover.
• Deductible Expenses: Most legitimate business expenses (salaries, rent, marketing, utilities) are fully deductible. However, some expenses like entertainment and interest may have limits.
• Unrealized Gains/Losses: Generally, these are not taxed until they are realized (e.g., when an asset is sold).
• Tax Losses: One of the most business-friendly features is the ability to carry forward tax losses indefinitely to offset future taxable income. You can also transfer losses between different companies in the same tax group.

5. Filing Your Corporate Tax Return

Unlike VAT (which is filed monthly or quarterly), Corporate Tax returns are filed annually.

• Filing Deadline: You must file your CT return and pay any tax due within 9 months from the end of your financial year. For example, if your financial year ends on December 31, your return is due by September 30 of the following year.
• Documentation: You must maintain audited financial statements, especially if your revenue exceeds AED 50 million or if you are a Qualifying Free Zone Person.

Frequently Asked Questions (FAQs)

Q1: If my profit is below AED 375,000, do I still need to file a return?

Yes. Every registered business must file an annual tax return, even if the final tax liability is zero.

Q2: What is "Small Business Relief"?

Eligible businesses with revenue below AED 3 million in a tax period can apply for Small Business Relief. If granted, the business is treated as having zero taxable income for that period, significantly reducing both the tax burden and the compliance paperwork.

Q3: How do Free Zone companies qualify for 0% tax?

To be a "Qualifying Free Zone Person," a company must:

• Maintain adequate "substance" in the UAE (office, employees, assets).
• Derive "Qualifying Income" as defined by the Ministry.
• Not have elected to be subject to the standard 9% rate.
• Comply with transfer pricing rules and have audited financial statements.

Q4: Is there still a 5% VAT if I pay 9% Corporate Tax?

Yes. VAT and Corporate Tax are two different systems. VAT is a tax on transactions and consumption, while Corporate Tax is a tax on business profits. A business may be subject to both.

Conclusion: Master the New Tax Era with BWMC

The introduction of Corporate Tax marks a significant evolution in the UAE business landscape. While it brings new responsibilities, it also reinforces the maturity and transparency of the UAE as a global financial center.

Preparing for Corporate Tax is not a task to be left for the end of the year. It requires proactive tax planning, robust accounting systems, and expert guidance. At Bridgewater Management Consultancies (BWMC), we provide the end-to-end support you need to navigate this new era. From registration and impact assessment to tax optimization and final filing, our team of tax experts ensures your business stays compliant and mathematically efficient.

Don’t let tax complexity hold you back.

Contact BWMC today for your Corporate Tax Assessment and Registration!