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Understanding Corporate Tax in the UAE: Ultimate Guide

corporate tax uae

The United Arab Emirates (UAE) has long been renowned for its favorable business environment, attracting a plethora of global businesses and investors with its strategic location, robust infrastructure, and investor-friendly policies. One of the key attractions has been the tax regime in the UAE, which is evolving to align with global standards while still offering significant advantages. This comprehensive guide delves into the nuances of the UAE’s updated tax framework as of 2024, focusing on Corporate Tax (CT), Value Added Tax (VAT), Excise Tax, and other pertinent aspects, explained in a clear and professional manner.

Corporate Tax in the UAE

Corporate Income Tax

In a landmark shift, the UAE announced the introduction of Corporate Income Tax (CIT) on businesses starting June 2023. This move represents a significant transition from the previous zero corporate tax regime. The CIT is designed to integrate the UAE into the global tax fabric, ensuring that businesses contribute to the country’s infrastructure and services while maintaining its competitive edge. The specifics of the tax rates and thresholds are highly anticipated by the business community.

A notable aspect of the CIT is the Small Business Relief for resident entities, which includes both natural persons (individuals) and juridical persons (entities). Eligible businesses with revenue less than or equal to AED 3,000,000 can elect for this relief, essentially being treated as if they have no taxable income for that tax period. This exemption simplifies compliance for smaller businesses, encouraging entrepreneurship and business growth.



Value Added Tax (VAT)

Since 2018, VAT has been a staple in the UAE’s tax system, applied at a standard rate of 5% on most goods and services. Businesses exceeding an annual turnover of AED 375,000 are required to register for VAT. This system enables businesses to claim input VAT on eligible expenses, fostering a transparent and efficient tax environment.

Excise Tax

Targeting goods that impact health or the environment, the UAE’s Excise Tax affects tobacco products, energy drinks, and electronic smoking devices. The rates vary between 50% to 100%, with businesses in these sectors required to comply with registration and reporting obligations.


Withholding Tax

The UAE continues to forgo withholding taxes on dividends, interests, or royalties paid to non-residents. This policy bolsters the UAE’s appeal as a global investment hub, offering clarity and certainty to foreign investors.

Double Taxation Agreements (DTAs)

To promote international trade and investment, the UAE has entered into numerous Double Taxation Agreements (DTAs) with other countries. These agreements help prevent businesses and individuals from being taxed twice on the same income and provide relief from double taxation. They also encourage the exchange of information between tax authorities, fostering transparency and cooperation.

Economic Substance Regulations (ESR)

Introduced in 2019, the Economic Substance Regulations (ESR) require UAE-based companies engaging in specific activities, such as banking, insurance, intellectual property, shipping, and holding companies, to demonstrate economic substance within the UAE. Companies subject to ESR must submit annual reports to the relevant authority, confirming that they meet the economic substance requirements.

Understanding Tax Entities in the UAE
Natural Persons

These are individuals engaging in business within the UAE. They’re subject to CIT if their business turnover exceeds AED 1 million annually. However, income from wages or personal investments is not taxed under CIT.

Juridical Persons

These entities, whether established in the UAE or foreign but managed from the UAE, are recognized as resident entities for tax purposes. They are subject to CIT on their UAE-derived income.

Non-Resident Entities

These are businesses that do not have a permanent establishment or base in the UAE but may earn income from the country. They are generally not subject to CIT unless they have a fixed place of business or a dependent agent in the UAE.


The UAE’s tax landscape is evolving, reflecting its commitment to global economic integration while maintaining its status as a premier business destination. For businesses operating in the UAE, understanding and navigating this landscape is crucial for compliance and strategic planning. Whether you’re a small startup or a multinational corporation, staying abreast of these changes will ensure you can leverage the benefits of the UAE’s dynamic market.

How Can Choose UAE Help

At Choose UAE, we are committed to making your business journey in the UAE as smooth and hassle-free as possible. One of the essential aspects of operating a business in the UAE is complying with its tax regulations, including registering for Value Added Tax (VAT) if required. Go with Choose UAE.

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