Corporate Tax Overview

Corporate Tax in UAE for Australian Businesses Expanding to Dubai

For Australian businesses expanding to Dubai or the UAE, understanding corporate tax obligations is critical for compliance, planning, and long-term growth. Corporate Tax (CT) in the UAE is a direct tax on business profits and applies to all businesses operating in the country.

Implementation and Legal Framework:

Corporate Tax in the UAE was implemented on 1st June 2023 under Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses, published on 9th December 2022. The law outlines rules for computing taxable profits, filing obligations, and compliance requirements for all UAE businesses.

General Tax Rates per UAE Corporate Tax

Tax Rate for Free Zone person

Applicability of Corporate Tax

Corporate Tax in UAE will be applicable to taxable persons based on the financial year of the taxable person

Example: –

   a) If the financial year of the company is from June to May, Corporate Tax will applicable from 01^st June 2023.

   b) If the financial year of the company is from January to December, Corporate Tax will applicable from 01^st January 2024.

   c) If the financial year of the company is from April to March, Corporate Tax will be applicable from 01^st April 2024.

Exempt person from UAE Corporate Tax

Below are exempted from UAE Corporate Tax

Exempt Income

Below incomes are exempted while calculating Corporate Tax

1. Dividend or profit received by a UAE-taxable person from another UAE-taxable entity.
2. Participation Exemption, subject to conditions
3. Foreign permanent establishment exemption
4. International transportation exemption

Deadline for Corporate Tax returns and payment

All Taxable persons must file the Corporate Tax return and make the Corporate Tax due within 9 months from the end of relevant tax year.

Small Business Relief

Small Business Relief is announced by UAE Authority to support start-ups and other small or micro businesses which helps to reduce the Corporate Tax burden and compliance Cost.

Small Business Relief is applicable till 31^st December 2026 and those resident taxable person whose annual gross turnover is less than 3 million dirham in all tax years till 31^st December 2026 will be eligible for Small Business Relief. Those who are eligible for the Small Business Relief can file a simplified Corporate Tax return.

Record Keeping

All taxable person must maintain all the relevant records related to Corporate Tax return for 7 years following the taxable year.

Accounting Standard

All companies must follow Accrual basis of accounting. Below are the accounting standard/ reporting standard which can be opted as per UAE Corporate Tax Law.

1. Cash Basis of Accounting- If the annual turnover is less than 3 Million Dirham.
2. IFRS for SMEs – If the annual turnover is less than 50 Million Dirham.
3. IFRS- For those taxable person whose annual turnover is more than 50 Million Dirham.

Requirement to maintain Audited Financial Statement

Below taxable person shall maintain an audited financial statement for UAE Corporate Tax purposes.

1. Taxable person whose annual turnover is more than 50 Million
2. Qualifying Free Zone

Currency

The taxable person shall compute the tax in AED (United Arab Emirates Dirham). If the function currency is a foreign currency, the transactions need to be converted to AED at the exchange rate approved by UAE Central Bank.

Withholding Tax

Withholding Tax rate as per UAE Corporate Tax is 0%

Related Party Transactions and Transfer Pricing Document

All Related party transactions must be at Arm’s Length Principle and Transfer pricing documentation is mandatory if;

1. The UAE entity’s turnover is more than 200 Million Dirhams in a taxable year
2. If the UAE entity is part of a Multi-National Entity (MNE) and the global turnover exceeds 3.15 Billion Dirhams in a taxable year.

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