Corporate Tax Advisory

It is a federal tax on business profits, introduced under Federal Decree-Law No. 47 of 2022 and administered by the Federal Tax Authority (FTA), applying to financial years starting on or after 1 June 2023. Most taxable persons pay 0% on taxable income up to AED 375,000 and 9% on taxable income above that threshold. Free zone entities that qualify as a Qualifying Free Zone Person can apply 0% to their qualifying income, subject to meeting specific conditions on substance and activity type.

Corporate Tax registration is generally required for taxable persons conducting business in the UAE, including most mainland and free zone companies, regardless of whether they ultimately owe any tax. There are specific categories of exempt persons — such as qualifying government entities, qualifying investment funds meeting prescribed conditions, and certain public benefit entities — set out in the Corporate Tax Law and related Cabinet Decisions. We assess each entity's status individually rather than assuming registration either does or does not apply.

It means the first AED 375,000 of a taxable person's taxable income — after all adjustments required by the Corporate Tax Law — is taxed at 0%, and only the portion above that threshold is taxed at 9%. It is a threshold within the computation, similar in structure to a tax-free band, not a revenue cap that disqualifies a business from the regime once crossed.

A Qualifying Free Zone Person is a free zone entity that meets a specific set of conditions under the Corporate Tax Law and related Cabinet and Ministerial Decisions — maintaining adequate substance in the UAE, deriving income that falls within defined 'qualifying activities', keeping non-qualifying income within a prescribed de-minimis threshold, complying with transfer pricing rules, and preparing audited financial statements. Meeting these conditions allows qualifying income to be taxed at 0% rather than the standard 9% rate above the threshold. Eligibility must be actively assessed against the entity's actual activities — it is not an automatic status that comes with a free zone licence.

Article 40 of the Corporate Tax Law allows two or more UAE resident entities under sufficient common ownership and control to elect to form a Tax Group, filing a single consolidated Corporate Tax return, eliminating intra-group transactions, and sharing a single AED 375,000 threshold across the group rather than each entity claiming it separately. Whether this is beneficial depends on the group's profit distribution across entities, each entity's individual QFZP status if applicable, and the administrative simplification versus the loss of separate threshold utilisation.

Related parties generally include entities or individuals connected through ownership, control, or family relationship — for example, a parent and subsidiary, sister companies under common ownership, or a company and its majority shareholder. Connected persons specifically include owners, directors, officers of the taxable person, and their relatives. Transactions between related parties and payments to connected persons are subject to arm's-length pricing requirements under Article 34, and connected-person payments face additional deductibility scrutiny.

A signed intercompany agreement establishes the legal basis for a transaction but does not by itself demonstrate that the pricing is arm's-length. Article 34 of the Corporate Tax Law requires related-party and connected-person transactions to be priced as if between independent parties, and the FTA can request supporting documentation and benchmarking analysis. The depth of documentation required scales with the materiality and complexity of the transactions — a small, low-value intercompany service arrangement needs less than a significant cross-border royalty or financing structure.

The management fee is generally a deductible expense for the UAE entity provided it is priced on an arm's-length basis and represents genuine services rendered, subject to related-party documentation requirements under Article 34. On the Indian side, the payment may attract Indian withholding tax depending on its characterisation, and relief may be available under the India-UAE Double Taxation Avoidance Agreement. We assess the UAE deductibility and the Indian withholding position together, since treating them as unconnected filings on each side of the border risks a mismatched or double-taxed outcome.

Small Business Relief is an elective simplification available to eligible resident taxable persons whose revenue for the relevant and prior tax periods falls below a prescribed threshold set by Ministerial Decision. Where elected and conditions are met, the taxable person is treated as having no taxable income for that period, simplifying the compliance burden considerably. It is not available to Qualifying Free Zone Persons or members of a multinational enterprise group meeting specified consolidated revenue criteria, among other exclusions, and must be actively elected — it is not automatic.

Under Articles 22 and 23 of the Corporate Tax Law, dividends and other profit distributions received from a qualifying shareholding, along with gains or losses on the disposal of such a shareholding, can be exempt from Corporate Tax where specific ownership percentage, holding period, and other conditions are met. This prevents the same underlying profit from being taxed both at the subsidiary level and again when distributed to the parent.

The Corporate Tax Law generally expects taxable income to be calculated based on the accounting standards applied by the entity, typically IFRS or, for smaller businesses meeting revenue conditions, IFRS for SMEs, both of which are accrual-based. Certain small businesses below a specified revenue threshold may be permitted to apply the cash basis of accounting for Corporate Tax purposes under conditions set by the FTA. We assess which basis is both permitted and most appropriate for a given entity's size and complexity.

The Corporate Tax Law disallows or restricts specific categories of expense regardless of their commercial legitimacy — a portion of entertainment expenditure, fines and penalties (other than compensation for breach of contract), bribes and other illicit payments, dividends and profit distributions, and Corporate Tax itself. Certain interest expense may also be limited under the general and specific interest deduction limitation rules in Article 30. Each of these requires a specific add-back adjustment when moving from accounting profit to taxable income.

A foreign entity's UAE branch or other form of Permanent Establishment is generally brought within the scope of UAE Corporate Tax on the income attributable to that UAE presence, following broadly similar computation principles, though the specific attribution of profit to the branch and its interaction with the foreign head office's own tax position requires separate analysis. Where the foreign parent is based in a jurisdiction with a double tax treaty with the UAE, treaty provisions may also be relevant to how the branch's presence and profit attribution are characterised.

Taxable persons are required to maintain accounting records and any other information required to substantiate the Corporate Tax return, generally for a period of seven years following the end of the relevant tax period, consistent with broader UAE record-retention requirements under tax legislation. This includes financial statements, supporting schedules for every adjustment made to accounting profit, and documentation for any exemption, relief, or election claimed.

The FTA applies administrative penalties for late Corporate Tax registration, late filing, and late payment, under the penalty framework set out in Cabinet Decision on administrative penalties for violations related to the application of the Corporate Tax Law. The specific penalty amounts and escalation depend on the nature and duration of the default, and are separate from the tax liability itself, which remains payable regardless of any penalty.

Yes. Where an error or omission is identified in a previously filed return, the taxable person can generally correct it through a voluntary disclosure filed with the FTA, which is the formal mechanism for correcting a filed return, declaration, or assessment. Filing a voluntary disclosure promptly on discovering an error is generally treated more favourably by the FTA than the error being identified later through an FTA audit or query.

No, they are separate taxes administered by the same authority, the FTA, but assessed on different bases. VAT is a transaction-based tax generally charged at 5% on the supply of most goods and services, filed periodically (monthly or quarterly). Corporate Tax is an annual tax on net business profit. A business can be registered for one, both, or — in limited cases — neither, depending on its activities, turnover, and legal form. Most operating businesses above the VAT registration threshold and within Corporate Tax scope will be registered for both.

Economic Substance Regulations, administered under the framework overseen by the Ministry of Finance, historically applied to specific categories of 'Relevant Activities' and required a UAE entity conducting them to file an ESR notification and, where applicable, an economic substance report demonstrating adequate substance in the UAE. Under Cabinet Decision No. 98 of 2024, the ESR notification and report filing obligation was discontinued for financial years commencing on or after 1 January 2023 — entities with an earlier financial year may still have historical ESR obligations to close out, but there is no ongoing ESR filing requirement for current periods. Corporate Tax's Qualifying Free Zone Person substance requirement is a separate, distinct legal test under the Corporate Tax Law itself, and continues to apply on its own terms regardless of the ESR wind-down.

A Qualifying Free Zone Person's qualifying income — which can include income from qualifying activities and transactions with parties outside the UAE, subject to the specific conditions in the relevant Cabinet and Ministerial Decisions — may be eligible for the 0% rate. However, qualifying activity classification is specific and not every category of foreign-facing trade automatically counts. Income from excluded activities, or income exceeding the de-minimis threshold from non-qualifying sources, would be taxed at the standard rate even for an otherwise-qualifying free zone entity.

An exemption generally removes a category of person or income entirely from the scope of Corporate Tax — for example, qualifying government entities or exempt income under the participation exemption. A relief is typically an elective mechanism that changes how tax is calculated or simplifies compliance for an eligible person who chooses to apply it — Small Business Relief is the clearest example, since it must be actively elected and carries its own conditions and exclusions.

Not automatically. The Qualifying Free Zone Person framework permits a limited amount of non-qualifying income — including certain mainland-sourced income — within a prescribed de-minimis threshold, expressed as a percentage of total revenue or an absolute amount, without losing QFZP status on the remaining qualifying income. Exceeding that threshold, however, generally causes the entity to lose QFZP status for qualifying income earned that tax period, not merely tax the excess portion.

We maintain a running estimate of taxable income through the financial year based on year-to-date accounting profit, applying the known adjustments (non-deductible expenses, exempt income, available reliefs) identified as transactions occur, rather than starting the computation cold at year end. This running provision is refined each quarter and gives the client visibility into their likely Corporate Tax liability well before the filing deadline.

Yes. Where a client receives a clarification request, desk review notice, or field audit notification from the FTA relating to a Corporate Tax filing, PNPC represents the client's position using the impact assessment, transfer pricing documentation, and computation workpapers maintained through the engagement, corresponding with the FTA on the client's behalf and coordinating the response.

PNPC agrees a fixed, written scope and fee for Corporate Tax Advisory before any work begins, scaled to the complexity of the entity — a single free zone company with straightforward qualifying income sits at a different fee level than a multi-entity group with related-party transactions, a Tax Group election under consideration, and India cross-border payment flows. We do not quote a single blanket figure because the scope genuinely varies by client; we provide a specific fee proposal after the initial scoping conversation.

A filing-only service completes the registration or the return and stops there. It does not assess whether Qualifying Free Zone Person status genuinely applies, whether a Tax Group election would help, whether related-party transactions have defensible arm's-length support, or how a UAE-India payment flow should be treated on both sides of the border. PNPC has been a practising Chartered Accountancy firm since 1986, with an operating Dubai office and India offices, and we treat Corporate Tax as a structural business decision with consequences that compound year over year — not a single form to be filed and forgotten.

Initial impact assessment covering taxable person status, applicable tax period, and free zone/mainland treatment. Corporate Tax registration support through EmaraTax. Qualifying Free Zone Person eligibility assessment and annual reassessment. Tax Group election analysis where relevant. Related-party and connected-person transaction mapping with arm's-length documentation. Exemption and relief review — participation exemption, foreign PE exemption, Small Business Relief. Interest deduction limitation review. Annual Corporate Tax return preparation and internal review before filing. India-UAE cross-border coordination where a group entity is involved. FTA query and audit representation.

Corporate Tax is one of several factors in the mainland-versus-free-zone decision, alongside licensing scope, ownership rules, office and visa requirements, and market access considerations. A free zone entity that can genuinely meet Qualifying Free Zone Person conditions may access a 0% rate on qualifying income that a mainland entity above the AED 375,000 threshold cannot. But QFZP status depends on real substance and qualifying-activity conditions being met — it should not be the sole driver of an entity-type decision made before the business's actual activities and customer base are clear.

No. Corporate Tax applies to financial years commencing on or after 1 June 2023. A company with a financial year ending 31 December, for example, was first within Corporate Tax scope for its financial year beginning 1 January 2024. There are specific transitional rules addressing the tax treatment of certain pre-regime assets and liabilities carried into the first tax period, which we assess where relevant.

For most entities, the tax period is the same as the financial year used for the entity's financial statements — commonly the Gregorian calendar year or another 12-month period ending on a date the entity has adopted. The Corporate Tax Law permits a change of tax period in specific circumstances, subject to FTA approval and conditions. Getting the tax period correctly recorded at registration matters because every subsequent filing deadline is calculated from it.

Yes, subject to conditions. The Corporate Tax Law generally permits a tax loss incurred in one tax period to be carried forward and offset against taxable income in future periods, subject to a percentage cap on the taxable income that can be offset in any one period and ownership-continuity conditions designed to prevent loss trading. Tax Group members may also be able to transfer losses between group entities subject to specific conditions.

Where a UAE entity is part of a multinational enterprise group, we assess whether the group's consolidated revenue brings additional obligations into scope — such as more detailed transfer pricing documentation requirements or exclusion from certain reliefs like Small Business Relief that are unavailable to members of larger multinational groups. We coordinate with the group's other tax advisors, particularly where an Indian group entity is involved, to ensure the UAE position is consistent with the group's broader international tax position rather than developed in isolation.

There is no revenue threshold below which registration is not required for an in-scope taxable person, but Small Business Relief — where elected by an eligible resident person under revenue thresholds set by Ministerial Decision — can result in taxable income being treated as nil for a qualifying period, which is a practical, though not automatic, form of relief for smaller businesses. Separately, taxable income up to AED 375,000 is taxed at 0% regardless of Small Business Relief. The two operate differently and eligibility for each should be assessed on its own terms.

The Corporate Tax Law includes a general anti-abuse provision allowing the FTA to disregard or adjust an arrangement, or a series of arrangements, entered into with the main purpose or one of the main purposes of obtaining a Corporate Tax advantage that is not consistent with the intention of the law, and that lacks valid commercial or economic reasons reflecting economic reality. It is a targeted safeguard against artificial structuring, not a rule that penalises legitimate business decisions with an incidental tax benefit.

PNPC's Dubai practice covers both VAT and Corporate Tax, along with the broader accounting function that underpins both. For clients who want a single engagement covering ongoing bookkeeping coded for both VAT and Corporate Tax purposes, we offer this as a combined VAT & Corporate Tax Accounting service that Corporate Tax Advisory typically sits alongside, so the annual return each year is a direct output of properly maintained books rather than a separate reconstruction exercise.

A holding company is generally still a taxable person under the Corporate Tax Law if it is conducting a business or business activity, which can include the activity of holding shares and other securities, and registration is typically required. Its taxable income may be low or nil if its only income is exempt dividend income under the participation exemption, but the registration and filing obligation itself is assessed independently of the resulting tax liability.

The UAE branch is generally subject to UAE Corporate Tax on the income attributable to its UAE Permanent Establishment. Separately, the Indian parent's global profits — which may include this UAE branch's results, depending on Indian tax residency and taxation rules — are subject to Indian corporate tax. The India-UAE DTAA provides mechanisms, including foreign tax credit relief, to mitigate double taxation of the same profit stream, but claiming that relief correctly requires the UAE Corporate Tax position and the Indian tax return to be prepared with each other in view.

The Corporate Tax regime continues to be refined through new Cabinet Decisions, Ministerial Decisions, and FTA public clarifications as the Ministry of Finance and FTA respond to how the law operates in practice — this is normal for a tax regime in its early years rather than a sign of instability. PNPC's Dubai team tracks these developments as part of the ongoing advisory relationship and reassesses each client's position annually, and ad hoc where a specific development is directly relevant to that client's structure.