Will a UAE company earning income from outside the UAE be subject to Corporate Tax in the UAE?

Yes. A UAE company is a resident of the UAE, so all its income from around the world is subject to UAE Corporate Tax, including any income from Pakistan or other countries.

UAE Corporate Tax for Pakistani Businesses

Corporate Tax In UAE

For Pakistani businesses and entrepreneurs, the UAE Corporate Tax is a tax on the net profit your business makes from its activities in the UAE.

The Corporate Tax in the UAE started from June 1, 2023. The main law that Pakistani investors should know about is the Federal Decree-Law No. 47 of 2022, which was published on December 9, 2022.

This tax is on the profit you make from your business in the UAE. Here are the Corporate Tax rates that apply to Pakistani-owned businesses in the UAE

General Tax Rates per UAE Corporate Tax

Details of Income	Tax Rate
Taxable Profit up to AED 375,000/- in a tax year	0%
Taxable Profit above AED 375,000/- in a tax year	9% applicable on the excess profit of AED 375,000/-

Tax Rate for Free Zone person

Details of Income	Tax Rate
Qualifying Income	0%
Non-Qualifying Income	9%

Applicability of Corporate Tax

For Pakistani businesses in the UAE, the Corporate Tax will apply to your company based on its financial year.

Example: –

If your UAE company's financial year is from June to May, Corporate Tax starts from June 1, 2023.
If your UAE company's financial year is from January to December, Corporate Tax starts from January 1, 2024.
If your UAE company follows an April to March financial year, which is common for Pakistani businesses, Corporate Tax will start from April 1, 2024.

Exempt person from UAE Corporate Tax

Below are exempted from UAE Corporate Tax

Automatic Exemption (Corporate Tax registration not required)	Exemption against application (Corporate Tax Registration required)
Government entities	Public Pension or Social Security fund
Government Controlled entities	Private Pension or Social Security fund
Extractive and Non-extractive natural resource businesses	Qualifying Investment fund

Automatic Exemption

(Corporate Tax registration not required)

Exemption against application

(Corporate Tax Registration required)

Government entities

Public Pension or Social Security fund

Government Controlled entities

Private Pension or Social Security fund

Extractive and Non-extractive natural resource businesses

Qualifying Investment fund

Exempt Income

For Pakistani businesses calculating their UAE Corporate Tax, the following types of income are exempt:

Dividends or profits your UAE business gets from another UAE company.
Profits from owning shares in other companies, if certain conditions are met (Participation Exemption).
Income from a foreign branch, if you choose this exemption.
Income from international transport, under certain conditions.

Deadline for Corporate Tax returns and payment

All businesses, including Pakistani-owned companies in the UAE, must file their Corporate Tax return and pay any tax due within 9 months after their tax year ends.

Small Business Relief

This is a special rule from the UAE government to help start-ups and small businesses, including those started by Pakistani entrepreneurs. It helps lower the tax amount and makes compliance easier.

This relief is for tax years ending on or before December 31, 2026. If your business has a total yearly revenue of less than AED 3 million, you can get this relief. Businesses that qualify can file a simpler Corporate Tax return.

Record Keeping

All businesses must keep all records related to their Corporate Tax return for 7 years after the tax year ends.

Accounting Standard

For Corporate Tax, all companies in the UAE must use the 'Accrual' basis of accounting. Here are the accounting standards you can choose from, based on your company's revenue:

Cash Basis of Accounting: You can use this if your yearly revenue is less than AED 3 Million.
IFRS for SMEs: You can use this if your yearly revenue is less than AED 50 Million.
Full IFRS: This is for businesses with a yearly revenue of more than AED 50 Million. Many Pakistani companies are familiar with this standard.

Do I Need an Audited Financial Statement?

You must have an audited financial statement for UAE Corporate Tax if you are:

A business with a yearly revenue of more than AED 50 Million.
A Qualifying Free Zone Person.

Currency

Your company must calculate its tax in AED (United Arab Emirates Dirham). If your main currency is different, like the Pakistani Rupee (PKR), you need to convert the amounts to AED using the exchange rate from the UAE Central Bank.

Withholding Tax

Withholding Tax rate as per UAE Corporate Tax is 0%

Related Party Transactions and Transfer Pricing Document

For Pakistani businesses with a company in the UAE, any transaction between related companies (like between your UAE company and its parent company in Pakistan) must follow the 'Arm’s Length Principle'. This means the price should be fair, as if the companies were unrelated. You must keep formal Transfer Pricing documents if:

Your UAE company's revenue is more than AED 200 Million in a tax year.
Your UAE company is part of a multinational group, and the group's total global revenue is more than AED 3.15 Billion in a tax year.

Projecting the UAE's position as a global hub for business & investment

Frequently Asked Questions

Yes, all companies registered in the UAE must follow the UAE Corporate Tax Law, no matter if they make a profit or a loss.

Yes, a company can apply to the Federal Tax Authority (FTA) to change its Corporate Tax period, but it must have a good business reason for the change.

No. The UAE Corporate Tax Law has a 'General Anti-Avoidance Rule' (Article 50), which means companies cannot make changes just to avoid paying tax.

The penalty is AED 1,000 for each month it is late, up to a maximum of AED 10,000.

Yes, you can keep your documents as hard copies or soft copies, as long as they are well-organized and easy to access for an inspection.

You must file the Corporate Tax return online and make the payment through the official FTA online portal.

Yes, registering for Corporate Tax is a must to get Small Business Relief. You can only claim the relief when you file your Corporate Tax return.