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The UAE is implementing a corporate tax regime in 2023, in support of OECD and G20 global tax goals.

Find out whether you are affected, along with key dates and action you may need to take.

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Navigating the complexities of the new UAE tax regulations - what, when and why

In January 2022 the United Arab Emirates (UAE) announced a new federal corporate tax system.

The United Arab Emirates (UAE) Federal Tax Authority is introducing the corporate income tax law (UAE Federal Decree-Law No 47 of 2022 – Taxation of Corporations and Businesses) in 2023. It will have a significant impact on businesses operating within the country. This new law will bring the UAE in line with international tax standards and will provide a more level playing field for businesses operating in the country.

It will be effective for financial years commencing on or after 1 June 2023, so time is short for companies with a presence in the country to understand the new rules and prepare for reporting requirements.

The standard corporate tax rate will be 9%, meaning it remains competitive versus the lowest corporate tax jurisdictions globally. It will be the second lowest in the GCC (Gulf Cooperation Council) region after Bahrain.

The introduction of a corporate rate marks a significant shift in taxation policy in a jurisdiction which was the only one in the region, and one of only a handful in the world, which charged no federal level corporate income tax.

Moves towards a global minimum tax helped drive the changes. The UAE government hopes to cement the country’s position as an international hub for business and investment by adhering to international standards. The MoF (Ministry of Finance) aims to build on best practices and principles that are accepted internationally, while remaining attractive to business.

Corporate tax rates

The new tax system will be split into three tiers:

0%

all annual taxable profits that fall under AED (Emirati Dirhams) 375,000 will be subject to a zero rate.

9%

all annual taxable profits above AED 375,000 (approximately €95,000) will be subject to a 9% rate.

15%

minimum BEPS rate for large multinationals (MNEs) with consolidated global revenues of €750M. Based on Pillar Two of the OECD agreement. The implementation date is yet to be decided by the UAE government.

Exemptions


The UAE Ministry of Finance has published details on exemptions. You can read more about taxable, exempt and qualifying free zone persons in our article, which summarises the businesses and individuals that are exempt.

Learn more

Reporting timeline

For Taxable Persons with a June-May financial year, the regime starts on 1 June 2023 and the following timelines show of how it will work. The second row shows what the timeline will be for a company that reports from January to December. The UAE financial year is 1 January to 31 December but businesses may choose a different year-end date.

Financial year

Starting 1 June 2023

Deadline for filing and payment
(if payable position)

28 February 2025
(nine months after FYE)

First taxable year

1 June 2023 to 31 May 2024

Financial year

Starting 1 January 2024

Deadline for filing and payment
(if payable position)

30 September 2025
(nine months after FYE)

First taxable year

1 January 2024 to 31 December 2024
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Overview

In landmark legislation published on 9 December 2022, the United Arab Emirates (UAE) introduced its corporate tax regime. This was in light of a general move towards a global minimum tax rate. It aims to do so while remaining attractive to businesses establishing and expanding in the Emirates.

The introduction of the corporate tax regime will provide a basis for the UAE to execute its support of the OECD Pillar Two international tax reform framework, which it signed along with 129 other countries in 2021.

The International Monetary Fund (IMF) in 2001 urged Gulf states to introduce taxes to diversify revenue streams and expand non-oil revenues. More recently, the IMF advised Gulf countries to maintain reform momentum despite oil boom drawing lessons from the past.

“Looking to the medium term, we welcome the planned fiscal reforms, including the expected introduction of a corporate income tax and gradual phasing out of business fee structures” – Mr Ali Al-Eyd of the IMF, speaking following his Article IV Consultation with UAE authorities, held from 2 to 17 November 2022 in Abu Dhabi.

Penalties

The UAE government announced that, as of 1 August 2023, the Federal Tax Authority (FTA) will impose administrative penalties on taxable persons who fail to comply with the UAE Corporate Tax Law.

The fines range from AED (Emirati Dirhams) 500 – around 128 euros – each month for late tax return filing, to AED 20,000 (€5,120) for each repeated offence of failing to keep the required tax records. Some other penalties are levied as percentages monthly and can quickly accumulate.

There are thirteen categories of violations which are punishable by fines which can add up to tens of thousands of euros if you fail to comply on multiple counts. While non-fiscal penalties have not yet been brought in, it’s important that you keep your house in order, for the reputation of your business locally and to avoid unnecessary costs.

FAQs

Review our resources below for further information and answers to common questions.

The UAE Ministry of Finance has published an FAQ page. If you need help or have specific questions contact us.

UAE corporate tax: key questions answered

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Taxable income Q&A

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Taxable persons/exemptions Q&A

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Free zone businesses Q&A

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How can TMF Group help?

We make UAE corporate tax simple for our clients. Our global presence and experts on the ground in 125 offices across 86 jurisdictions around the world, including Abu Dhabi and Dubai, have the knowledge and experience to help businesses of all sizes navigate and implement the new corporate tax regime.

Our accounting and tax experts in the UAE can support you with:

  • preparing gap and impact assessment report
  • registering your company in the corporate tax portal
  • supporting with provision of calculations
  • coordinating the filing of returns
  • reviewing and optimising your finance processes in order
    to meet the tax requirements
  • building awareness and regular updates on new developments.
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