Frequently Asked Questions
Corporate Tax

General Corporate Tax Questions

  1. What is Corporate Tax (CT)?
    Corporate Tax is a direct tax imposed on the net profit of businesses. It is levied on taxable income earned by companies and certain individuals conducting business activities.

  2. What is the Corporate Tax rate in the UAE?

    • 0% for taxable income up to AED 375,000 (Small Business Relief).

    • 9% for taxable income exceeding AED 375,000.

    • 0% for qualifying Free Zone Persons meeting specific criteria.

  3. Who is subject to Corporate Tax in the UAE?
    Corporate Tax applies to:

    • UAE businesses.

    • Foreign businesses with a permanent establishment in the UAE.

    • Individuals conducting business activities under a commercial license.

  4. Are Free Zone entities subject to Corporate Tax?
    Free Zone entities can benefit from a 0% CT rate if they meet the qualifying conditions, including generating qualifying income and adhering to regulatory requirements.

  5. What is the Corporate Tax treatment for small businesses?
    Businesses with taxable income below AED 375,000 can benefit from Small Business Relief, subject to conditions outlined by the UAE Ministry of Finance.

Corporate Tax Registration and Filing

  1. Do all businesses need to register for Corporate Tax?
    Yes, all taxable persons, including Free Zone Persons, must register for Corporate Tax, even if they expect to benefit from a 0% tax rate.

  2. How do I register for Corporate Tax?
    Registration is done through the Federal Tax Authority (FTA) portal. Businesses must provide their trade license and other relevant details.

  3. When are Corporate Tax returns due?
    Corporate Tax returns must be filed annually. The specific deadline depends on the company’s financial year, but it is generally 9 months after the end of the tax year.

Corporate Tax Deductions

  1. What expenses are deductible under Corporate Tax?
    Businesses can deduct expenses that are:

    • Incurred wholly and exclusively for business purposes.

    • Not capital in nature.

    • Reasonable in amount.

  2. Are employee salaries deductible?
    Salaries and benefits paid to employees are deductible unless paid to owners or partners without a formal employment contract.

  3. Can businesses deduct interest expenses?
    Interest expenses are deductible but may be subject to limitations such as 30% of EBITDA (Earnings Before Interest, Tax, Depreciation, and Amortization).

Specific Scenarios

  1. Is income from dividends and capital gains taxable?
    Dividends and capital gains are exempt if they meet the conditions for participation exemption (e.g., the business owns at least 5% of the shares in another company).

  2. How is Corporate Tax applied to foreign income?
    Foreign income is generally taxable unless it qualifies for an exemption under UAE CT law.

  3. What is the tax treatment for intra-group transactions?
    Transactions between group entities are subject to transfer pricing rules and must comply with the arm’s length principle.
    Errors in VAT reporting can lead to fines ranging from 5% to 50% of the unpaid VAT, depending on the severity of non-compliance.

Corporate Tax for Real Estate

  1. Is rental income subject to Corporate Tax?

  • Rental income from business activities is subject to Corporate Tax.

  • Real estate held by individuals for personal investment is generally outside the scope of Corporate Tax.

  1. What is the Corporate Tax treatment for mixed-use properties?
    Mixed-use properties must allocate taxable income and expenses between business and non-business use.

  2. How is income from real estate management taxed?
    Income from real estate management services is subject to 9% Corporate Tax if taxable income exceeds AED 375,000.

Corporate Tax and Free Zones

  1. What qualifies as "Qualifying Income" in Free Zones?
    Qualifying Income typically includes:

  • Income from transactions with entities outside the UAE.

  • Income from transactions with Free Zone entities.
    Specific criteria must be met as per UAE CT law.

  1. Are Free Zone entities taxed on mainland income?
    Yes, Free Zone entities earning income from mainland UAE are subject to 9% Corporate Tax on that income.

  2. What happens if a Free Zone entity fails to meet qualifying criteria?
    The Free Zone entity will lose its 0% Corporate Tax rate and be subject to 9% Corporate Tax on its total taxable income.

Additional Questions

  1. What is the tax treatment for fines and penalties?
    Fines and penalties are not deductible under Corporate Tax.

  2. Are donations and sponsorships deductible?
    Donations made to approved charitable organizations are deductible, provided they align with the guidelines set by the UAE government.

  3. How does Corporate Tax apply to partnerships?

  • Unincorporated partnerships may be treated as transparent entities, and income is taxed at the partner level.

  • Incorporated partnerships are subject to Corporate Tax as a separate entity.

  1. What happens if I fail to comply with Corporate Tax regulations?
    Non-compliance may result in penalties, including:

  • Fines for late registration or filing.

  • Additional penalties for underreporting or misreporting taxable income.