United Arab Emirates
ey.com/globaltaxguides
Abu Dhabi GMT +4
Ernst & Young
+971 (2) 627-7522
Mail address: Fax: +971 (2) 627-3383
P.O. Box 136
Abu Dhabi
United Arab Emirates
Street address: Nation Tower 2
Corniche
Abu Dhabi
United Arab Emirates
Principal Tax Contacts
Rajan Parmar,
+971 (4) 312-9229
UAE Tax Market Segment Leader Mobile: +971 (56) 656-5191
Email: rajan.parmar@ae.ey.com
Chris Lord, +971 (4) 312-9459
MENA Tax Markets Leader
Mobile: +971 (56) 683-2109
Email: chris.lord@ae.ey.com
Dubai GMT +4
Ernst & Young
+971 (4) 332-4000
Mail address: Fax: +971 (4) 701-0967
P.O. Box 9267
Dubai
United Arab Emirates
Street address:
ICD Brookfield Place
Al Mustaqbal Street
Dubai International Financial Centre
Dubai
United Arab Emirates
Principal Tax Contacts
Rajan Parmar,
+971 (4) 312-9229
UAE Tax Market Segment Leader Mobile: +971 (56) 656-5191 Email: rajan.parmar@ae.ey.com
Chris Lord, +971 (4) 312-9459 MENA Tax Markets Leader Mobile: +971 (56) 683-2109
Email: chris.lord@ae.ey.com
International Tax and Transaction Services – International Corporate Tax Advisory and Transaction Tax Advisory
Rajan Parmar
Brandon George
Mina Al-Khudairi
Barry Magill
+971 (4) 312-9229
Mobile: +971 (56) 656-5191
Email: rajan.parmar@ae.ey.com
+971 (4) 701-0326
Mobile: +971 (55) 791-8461
Email: brandon.george@ae.ey.com
+971 (4) 701-0791
Mobile: +971 (56) 522-7049
Email: mina.alkhudairi@ae.ey.com
+971 (2) 417-4400
Mobile: +971 (56) 422-3736
Email: barry.magill1@ae.ey.com
B. Taxes on corporate income and gains
Corporate tax implications for financial years prior to 1 June 2023. Although no federal taxation existed in the UAE for financial years beginning prior to 1 June 2023, each of the individual Emirates (Abu Dhabi, Ajman, Dubai, Fujairah, Ras Al Khaimah, Sharjah and Umm Al Quwain) have issued corporate tax decrees that theoretically apply to all businesses established in the UAE. However, in practice, these laws have not been applied. For the financial years beginning before 1 June 2023, taxes were imposed at the Emirate level only on oil- and gas-producing companies in accordance with specific government concession agreements, and on branches of foreign banks under specific tax decrees or regulations or in accordance with agreements with the Rulers of the Emirates in which the branches operate.
The preceding paragraph describes how the practice has evolved in the UAE at the level of the individual Emirates. Recently the Ruler of Dubai issued Law No. (1) of 2024 on taxation of foreign banks operating in Dubai. which includes new provisions to consider in the application of the federal Corporate Tax Law to foreign banks.
Several Emirates have free zones that offer tax and business incentives aimed at making the UAE a global financial and commercial center. The incentives usually include tax exemptions or a 0% tax rate for a guaranteed period (further information on Qualifying Free Zone Persons (QFZPs) is provided in the Qualifying Free Zone Persons section), the possibility of 100% foreign ownership, absence of customs duty within the free zone and a “one-stop shop” for administrative services. The free zones include, but are not limited to, the Dubai Airport Free Zone (DAFZ), Dubai International Financial Centre (DIFC; typically for financial services), Dubai Internet City (DIC), Dubai Media City (DMC), Dubai Multi Commodities Centre (DMCC), Dubai South (DS), Jebel Ali Free Zone (JAFZ), and the Abu Dhabi Global Market (ADGM; typically for financial services).
Corporate tax implications for financial years beginning on or after 1 June 2023. Near the end of 2022, the UAE Ministry of Finance (MoF) published the UAE Corporate Tax Law effective for accounting periods beginning on or after 1 June 2023. The primary UAE Corporate Tax Law has been supplemented with secondary legislation through a series of Cabinet Decisions, Ministerial Decisions and Federal Tax Authority (FTA) Decisions issued by the UAE Cabinet of Ministers and other topic-focused guides relating to various articles in the UAE Corporate Tax Law issued by the FTA.
Details regarding the new corporate tax rules are provided below.
Corporate tax. Under the UAE Corporate Tax Law, a taxable person shall be either a resident or a nonresident person. The definition of a resident person covers the following:
• A juridical person incorporated or otherwise established or recognized in the UAE (including a Free Zone Person; the definition of a Free Zone Person includes branches of resident and nonresident persons that are registered in a UAE free zone)
• A juridical person incorporated or otherwise established or recognized outside of the UAE that is effectively managed and controlled in the UAE
• A natural person that conducts a business activity in the UAE
• Any other person as may be determined in a Cabinet Decision
Resident taxable persons are subject to corporate income tax on their worldwide income.
A nonresident person may be subject to corporate tax if the person has a permanent establishment in the UAE, derives UAEsource income or has a nexus in the UAE. A nonresident person has a nexus in the UAE if they earn income from any immovable property in the UAE (see Taxation of nonresidents).
Corporate tax rates. The headline corporate tax rate is set at 9%. A rate of 0% applies to taxable income not exceeding AED375,000. A rate of 0% also applies to Qualifying Free Zone Persons with respect to their Qualifying Income.
Exempt persons. The following persons are considered as exempt persons for UAE Corporate Tax Law purposes (and as such not subject to corporate tax, albeit specific filings and elections may be required):
• Government entities
• Government-controlled entities
• Qualifying public benefit entities (based on a specific list of qualifying public benefit entities published by the MoF)
• Qualifying investment funds (investment funds that meet certain criteria)
• Persons engaged in extractive businesses (exploring, extracting, removing or otherwise producing and exploiting the natural resources in the UAE)
• Persons engaged in a non-extractive natural resource businesses (separating, treating, refining, processing, storing, transporting, marketing or distributing the natural resources in the UAE)
• Public and private pension or social security funds
• A UAE juridical person that is wholly owned and controlled by certain exempt persons under certain conditions
• Any other person as may be confirmed by the Minister of Finance
Qualifying Free Zone Persons. A QFZP is a Free Zone Person (FZP) who meets the following criteria:
• Maintains adequate substance in the UAE. A QFZP undertakes its core income-generating activity in a free zone as well as having adequate assets, number of qualified full-time employees and incurring an adequate number of operating expenditures in relation to each activity.
• Derives qualifying income. Qualifying income is defined in a Cabinet Decision as the following:
Income derived from transactions with FZPs (except for income derived from Excluded Activities (according to a specific list published by the Ministry of Finance)
Income derived from transactions with non-FZPs with respect to Qualifying Activities that are not Excluded Activities (according to a specific list published by the MoF)
UAE taxpayers, including QFZPs, are required to file a tax return and pay any tax due no later than nine months after the end of the financial year. Additionally, UAE taxpayers may be requested to submit financial statements to the FTA.
A QFZP, as well as taxable persons deriving revenues exceeding AED50 million, are required to prepare and maintain audited financial statements.
Dividends. Dividend income is, in general, subject to corporate tax at a 9% rate unless a specific exemption applies. Dividend income realized by a QFZP may be subject to 0% corporate tax rate if it is regarded as qualifying income.
Domestic dividend exemption. Dividend income and other profits distributions received from a juridical person (that is a UAE tax resident) are considered as exempt income for UAE corporate tax purposes.
Participation exemption. Other dividend income and profit distributions, as well as any other income derived from a qualified shareholding (such as capital gains on the sale of shares) may be exempt from UAE corporate tax if the following conditions are met:
• The taxable person has ownership of at least 5% in the shares or capital of the concerned participation (which entitle the person to not less than 5% of the profits and not less than 5% of any liquidation proceeds). This requirement is also considered to be met if the aggregated acquisition costs of the participation concerned is equal to or exceeds AED4 million.
• The taxable person has held the participation concerned, or has the intention to hold such participation, for an uninterrupted period of at least 12 months.
• The juridical person (in which the UAE taxable person holds a participating interest) is subject to corporate tax, or any other tax of a similar character, in its own jurisdiction at a rate of at least 9%.
• Not more than 50% of the direct and indirect assets of the participation concerned consist of ownership interests or entitlements that would not have qualified for the participation exemption if held directly by a taxable person.
• Other conditions prescribed by a specific Ministerial Decision (ownership interest should be classified as equity interest and ownership interest includes ordinary shares, preferred shares and redeemable shares, among others) are met.
Foreign tax credit. UAE tax residents should be subject to the UAE corporate tax on their worldwide income, which includes foreign-sourced income that may be also subject to tax in another jurisdiction. Any corporate tax paid abroad on income that is also subject to UAE corporate tax (including withholding tax paid abroad) may be allowed as a tax credit against the UAE corporate tax liability as a foreign tax credit. The foreign tax credit that will be utilized in the relevant tax period cannot exceed the amount of UAE corporate tax due in relation to the income considered (that is, taxable income that was subject to tax outside the UAE and for which foreign tax credit is claimed). Guidance to calculate such foreign tax credit has been provided in the relevant topic-specific guide issued by the FTA. Any unutilized foreign tax credit cannot be carried forward or carried back.
A UAE taxable person will need to make sure that they maintain all necessary records for the purposes of claiming the foreign tax credit.
C. Determination of taxable income
General. Taxable income should be determined separately for each taxable person on the basis of standalone financial statements prepared in accordance with accounting standards accepted in the UAE, adjusted for certain items. Such adjustments include the following:
• Exempt income
• Unrealized gain or loss (taxable person may elect to take into account gains and losses on a realization basis)
• Relief relating to transfers within a Qualifying Group or Business Structuring
• Disallowed deductions, including net interest expenditure in excess of the higher of AED12 million or 30% of the adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) and categories of disallowable expenditure, such as fines and penalties
• Transactions with related parties and connected persons (see Connected persons in Section E)
• Tax loss relief
• Special relief for a Qualifying Business Activity
• Any other income or expenditure that may be specified under a Cabinet Decision
• Any other adjustments as may be specified by the Minister of Finance, including transitional rules which have been introduced to support a fair and smooth transition into the new tax law
The calculation of taxable income normally follows accounting rules; however, the UAE corporate tax regime disallows or restricts the deduction of certain specific expenses.
Businesses must maintain all records and documents for seven years following the end of the tax period.
Groups of companies. A UAE resident group of companies may make an application to form a tax group and be treated as a single taxable person if all the following criteria are met:
• The parent entity and all subsidiaries are juridical persons.
• The parent company holds at least 95% of the share capital, voting rights and entitlement to profits and net assets of its subsidiaries (directly or indirectly).
• Neither the parent nor the subsidiaries can be a QFPZ or an exempted person.
• The parent and subsidiaries should have the same fiscal year and apply the same financial standards.
Once formed, the tax group is treated as a single taxable person, with the parent company responsible for the administration of compliance process on behalf of the tax group.
The parent company of the tax group needs to aggregate the financial results, assets and liabilities of each subsidiary for the purposes of calculating taxable income.
To the extent that a tax group is not formed, tax losses can be transferred from one taxable person to another on fulfillment of
Under the UAE Corporate Tax Law, UAE businesses may need to file a disclosure together with their tax return no later than nine months after the end of the financial year.
Related parties. Under the law, parties to a transaction are considered related if they meet certain conditions. These conditions broadly consist of the following:
• Natural persons who are related up to the fourth degree of kinship or affiliation. This also includes affiliation through adoption or guardianship.
• A natural person and a juridical person, if the natural person (either alone or through one of its related parties) directly or indirectly owns the juridical person (that is, has a 50% or more shareholding interest).
• A natural person (whether alone or together with its related parties) who has direct or indirect “control” over a juridical person. “Control” is further defined in the UAE Corporate Tax Law.
• Two or more juridical persons, if one of the juridical persons (either alone or in conjunction with its related parties) directly or indirectly owns the other juridical person (that is, has a 50% or more ownership interest).
• A juridical person, (whether alone or in conjunction with its related parties), directly or indirectly controls another juridical person.
• Any person who (either alone or together with its related parties) has direct or indirect ownership (that is, 50% or more) or controls two or more juridical persons.
• Persons and their permanent establishments.
• Partners in an unincorporated partnership.
• Trustees, founders, settlors and beneficiaries of trusts or foundations and their related parties.
Connected persons. A person is construed to be “connected” to a business if the person meets at least one of the following conditions:
• The person is an owner of the business.
• The person is a director or an officer in the business.
• The person is a related party of any of the above (that is, a relative within the fourth degree of kinship or affiliation).
F. Tax treaties
The UAE has tax treaties currently in force with the following jurisdictions.
Albania France Panama
Algeria Gabon Paraguay
Andorra Georgia Philippines
Angola Greece Poland
Antigua and Guinea Portugal
Barbuda Hong Kong SAR Romania
Argentina Hungary Russian Federation
Armenia India (limited)
Austria Indonesia Rwanda
Azerbaijan Ireland St. Vincent and Bangladesh Israel Grenadines
Barbados
Italy
Belarus Japan
San Marino
Saudi Arabia
Belgium Jersey Senegal
Belize Jordan Serbia
Bermuda Kazakhstan Seychelles
Bosnia and Kenya Singapore
Herzegovina
Korea (South) Slovak Republic
Botswana Kosovo Slovenia
Brazil Kyrgyzstan
South Africa
Brunei Darussalam Latvia Spain
Bulgaria Lebanon Sri Lanka
Cameroon Liechtenstein Sudan
Canada Lithuania Switzerland
Chile Luxembourg Syria
China Mainland Malaysia Tajikistan
Comoros Maldives Thailand
Congo Malta Tunisia (Democratic Mauritania Türkiye Republic of) Mauritius Turkmenistan
Costa Rica Mexico Ukraine
Croatia Moldova United Kingdom
Cyprus Montenegro Uruguay
Czech Republic Morocco Uzbekistan
Ecuador Mozambique Venezuela
Egypt Netherlands Vietnam
Estonia New Zealand Yemen
Ethiopia Niger Zambia
Fiji North Macedonia Zimbabwe
Finland Pakistan
In addition, treaties with the following jurisdictions are in various stages of negotiation, renegotiation, signature, ratification, translation or entry into force.
Antigua and Gambia Niger
Barbuda Ghana Nigeria
Benin Guernsey Palestinian
Burkina Guyana Authority
Faso Iraq Peru
Burundi Jamaica Qatar
Chad Liberia St. Kitts and Colombia Libya Nevis
Côte d’Ivoire Malawi Sierra Leone
Dominica Mali Suriname
Equatorial Monaco Uganda
Guinea Nepal