Corporate Tax in the UAE: Key Aspects and Support by AC Business Experts DMCC

The UAE’s corporate tax system has introduced significant changes to align with international standards and strengthen the UAE’s position as a transparent and attractive business hub.

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The main aspects of corporate tax in the UAE

Below is an overview of the main aspects of corporate tax in the UAE, along with details on how AC Business Experts DMCC can assist companies in meeting compliance requirements, especially for maintaining Qualifying Free Zone Person (QFZP) status.

1. Overview of Corporate Tax Implementation

Historically known for its tax-free environment, the UAE introduced corporate tax on business profits in June 2023 under Federal Decree-Law No. 47 of 2022. This legislation aims to align the UAE with global tax standards and targets profits exceeding AED 375,000, taxed at a rate of 9%.

2. Key Provisions of Corporate Tax in the UAE

The corporate tax law outlines several primary provisions:

Tax Rate: The corporate tax rate is set at 9% on taxable income exceeding AED 375,000, with income below this threshold remaining tax-exempt to support small businesses.
Qualifying Free Zone Person (QFZP): Free zone companies that meet specific criteria—including maintaining adequate economic substance, adhering to transfer pricing requirements, and submitting audited financial statements—qualify for a 0% tax rate on eligible income.
Exemptions: Companies in extractive industries (e.g., oil and gas), charitable organizations, and entities earning passive income (e.g., dividends and certain foreign income) may be exempt from corporate tax.

3. Compliance Requirements for Corporate Tax Filing

To comply with UAE corporate tax obligations, companies must:
Keep accurate financial records and prepare financial statements.
File an annual corporate tax return with the Federal Tax Authority (FTA) based on their fiscal period.
Fulfill additional documentation and reporting requirements if seeking QFZP status.

4. Penalties for Non-Compliance

Companies that fail to comply with corporate tax obligations are subject to penalties, including:
Late Filing Penalties: Penalties apply to companies that do not submit tax returns on time.
Incorrect Information Penalties: Providing inaccurate or false information on tax filings may result in additional fines.

How AC Business Experts DMCC Supports QFZP Compliance?

For companies aiming to achieve or maintain QFZP status, AC Business Experts DMCC offers comprehensive support in meeting UAE corporate tax requirements:

1. Economic Substance Compliance

Review business operations to ensure necessary asset and expense levels.
Assist with workforce planning and expense management within the Free Zone.
Advise on minimum operational requirements to meet economic substance standards.

2. Income Classification and Tracking

Classify and track qualifying versus non-qualifying income.
Monitor interactions with Free Zone and non-Free Zone entities.
Document income from intellectual property and other eligible sources.

3. Tax Reporting and Submission

Prepare and submit corporate tax returns with accuracy.
Ensure all deadlines and reporting obligations are met, reducing penalty risks.

4. Transfer Pricing Compliance

Ensure transactions with related entities comply with the arm’s length principle.
Maintain proper transfer pricing documentation to minimize audit risks.

5. Financial Statement Preparation and Auditing

Conduct internal audits and prepare compliant financial statements.
Assist with external audits required to secure QFZP benefits.

6. De Minimis Rule Compliance

Track non-qualifying income to ensure it remains within allowed limits.
Provide ongoing monitoring of revenue and expenses to retain QFZP status.

Conclusion

The introduction of corporate tax in the UAE brings new regulatory requirements that businesses must navigate carefully. Partnering with AC Business Experts DMCC simplifies compliance, especially for companies aiming to maintain QFZP benefits in Free Zones.

For more detailed information on UAE corporate tax, please refer to Federal Decree-Law No. 47 of 2022 and resources available on the UAE Ministry of Finance website.

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