Definition

Corporate Tax (CT) is a direct tax levied on the net income or profit of corporations and business entities. It is one of the most common forms of business taxation worldwide, with rates and structures varying significantly across jurisdictions. Corporate tax systems typically allow deductions for business expenses, provide exemptions for certain types of income, and include transfer pricing rules to prevent profit shifting across borders.

UAE Context

The UAE introduced federal Corporate Tax effective 1 June 2023 under Federal Decree-Law No. 47 of 2022. The headline rate is 9 percent on taxable income exceeding AED 375,000, with a zero percent rate on income below that threshold. Qualifying free zone entities may benefit from a 0 percent rate on qualifying income, provided they maintain adequate substance and comply with regulatory requirements. Exempt entities include government bodies, qualifying public benefit organisations, pension and social security funds, and qualifying investment funds. The tax applies to all business activities conducted in or from the UAE, including branches of foreign companies.

Key Data

The UAE’s 9 percent rate is the lowest statutory corporate tax rate among G20-aligned economies and significantly below the OECD average of approximately 23 percent. The law includes transfer pricing rules aligned with the OECD Base Erosion and Profit Shifting (BEPS) framework, requiring arm’s-length pricing and country-by-country reporting for multinational enterprises. Small businesses and startups benefit from the AED 375,000 zero-rate threshold, preserving the UAE’s attractiveness for entrepreneurs.

Vision 2031 Significance

Corporate Tax represents the UAE’s alignment with the evolving global tax consensus, particularly the OECD/G20 Inclusive Framework on BEPS. It positions the UAE as a responsible participant in international tax governance while maintaining a highly competitive rate that preserves the country’s status as a premier business destination. Revenue from corporate tax supports fiscal diversification and long-term budgetary sustainability.

Related Terms

• VAT in the UAE — The complementary indirect tax generating federal non-oil revenue.
• Free Zones — Jurisdictions offering preferential corporate tax treatment under qualifying conditions.
• OECD BEPS Framework — The international standards the UAE’s corporate tax rules align with.
• Federal Tax Authority (FTA) — The body administering corporate tax compliance.