UAE Corporate Tax Law: Federal Decree-Law 47/2022 Guide

What is the UAE Corporate Tax Regime (Federal Decree-Law No. 47 of 2022)?

Federal Decree-Law No. 47/2022 is the main law governing UAE corporate tax effective June 1, 2023. Corporate Tax in the UAE is imposed at a rate of 0% on taxable income up to AED 375,000, and 9% on taxable income exceeding AED 375,000.

What concepts does the law cover? (i.e. Taxable Persons, Resident Persons, Taxable Income, etc)

Who is subject to UAE Corporate Tax?

The Corporate Tax Law applies to the following businesses and persons, including:

• UAE mainland companies and Free Zone entities
• Foreign companies with a Permanent Establishment in the UAE
• Foreign entities with a taxable nexus in the UAE
• Certain natural persons conducting a business or business activity in the UAE
• Tax Groups

The UAE has also introduced a Domestic Minimum Top-up Tax (DMTT) for financial years starting on or after 1 January 2025.

The DMTT applies to qualifying multinational enterprise groups with consolidated annual revenues of €750 million or more. The DMTT is intended to support a minimum effective tax rate of 15% under the OECD Pillar Two rules.

What is exempt income?

Exempt Income refers to income that is specifically excluded when calculating taxable income:

• Certain dividends received by a Taxable Person
• Certain income from qualifying shareholdings under the Participation Exemption
• Certain income earned by exempt persons where the exemption conditions are met

Exempt Persons under the Law (including Public Benefit Entities)

The Corporate Tax Law provides exemptions for specific categories of persons and entities.

1. Government Entities Generally exempt from Corporate Tax unless they conduct a business activity under a licence issued by a Licensing Authority
2. Government-Controlled Entities
3. Certain Extractive Businesses
4. Certain Non-Extractive Natural Resource Businesses
5. Qualifying Public Benefit Entities A Qualifying Public Benefit Entity is exempt from Corporate Tax if it is established for religious, charitable, scientific, or educational purposes.
6. Qualifying Investment Funds The purpose is to ensure that qualifying investments are taxed effectively.
7. Certain public and private pension funds
8. Certain social security funds

Exemption is not automatic in all circumstances. Entities must meet the conditions prescribed by the Corporate Tax Law and related decisions.

Business reliefs and special regimes created by the Law

To support businesses navigating growth, the Corporate Tax Law includes several reliefs and special tax regimes for eligible businesses.

Tax Loss Relief for Businesses

The law allows businesses to carry forward qualifying tax losses and offset them against future taxable income, subject to applicable conditions.

This relief reduces future corporate tax liabilities and manage losses incurred during startup or expansion phases.

Qualifying Group Relief & Business Restructuring Relief

The law provides relief for certain transfers of assets and liabilities between members of a qualifying group.

The objective is to facilitate internal business reorganizations without being taxed when there is no actual change in ownership.

This may be relevant when businesses:

1. Transfer assets within a corporate group
2. Consolidate and reorganize operations

How does Corporate Tax apply to Qualifying Free Zone Persons?

A Qualifying Free Zone Person (QFZP) is a Free Zone entity that:

• maintains adequate substance in the UAE
• derives Qualifying Income
• has not elected to be subject to Corporate Tax at the standard rate, and
• satisfies the applicable conditions under the Corporate Tax regime, including the De minimis rule

Qualifying Free Zone Persons are eligible for a 0% corporate tax rate on qualifying income and non-qualifying income is taxed at 9%.

To maintain its status as a Qualifying Free Zone Person, the entity must ensure that its non-qualifying income does not exceed the lower of AED 5 million or 5% of its total revenue, which is called the de minimis rule.

If a Qualifying Free Zone Person fails to meet the required conditions at any time during a tax period, it will lose its status as a QFZP from the beginning of that tax period and four subsequent taxation periods.

Financial reporting and compliance obligations under the Federal Tax Authority

Businesses that fall within the scope of the CT Law are generally required to complete corporate tax registration with the FTA. Upon successful registration, a CT Tax Registration Number (CT TRN) is issued and used for administration and correspondence with the FTA.

Registration and ongoing compliance are managed through the EmaraTax platform.

Filing Annual Corporate Tax Returns

Corporate Tax operates on a self-assessment basis. Taxable persons are responsible for calculating their own tax liability and ensuring that their CT Return is submitted accurately.

A Corporate Tax Return is generally filed for each relevant tax period and includes information relating to:

• Taxable Income
• Accounting net profit and tax adjustments
• Exempt Income and applicable reliefs
• Corporate Tax owed for the period

Returns must be submitted within the deadlines prescribed by the Corporate Tax Law and related regulations.

Record Keeping and Financial Reporting

Businesses operating in the UAE are generally required to maintain accounting records and supporting documentation for at least 7 years following the end of the Tax Period to which they relate.

These records may include financial statements, invoices and receipts, contracts and supporting agreements, and other documentation supporting deductions, exemptions, and relief claims.

Transfer Pricing Rules and Related Party Transactions

Companies engaged in related party transactions or connected persons may be subject to transfer pricing requirements.

These rules are designed to ensure that transactions are conducted on an arm’s-length basis and help prevent profit shifting between related entities for tax purposes.

Businesses may be required to maintain supporting documentation to demonstrate compliance with the UAE’s transfer pricing framework.

Recent updates on Corporate tax Regulatory & Compliance

Recently, the government has released a number of official documents that provide further details about how corporate tax is applied to companies who operate in the United Arab Emirates.

Many of these provisions are applicable to financial years that begin on or after the dates specified in the applicable legislation. The legal and administrative framework is established for registration, filing, assessments, audits, and penalties in the UAE.

While Federal Decree-Law No. 47 writes the core of the Corporate Tax Law, firms frequently need to consult local legislation and FTA guidelines to understand how the rules apply in practice.

Companies that need to navigate more complex transactions (including Free Zone activities, group structures, or cross border operations) may need expert accounting and bookkeeping, tax advisory or legal services to assess how their strategy impacts their tax obligations.