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A taxable person for UAE corporate tax is either a resident person or a non resident person. UAE companies, including free zone companies, are residents and are taxable. Source: Federal Decree-Law No. 47, Article 11, checked .
Being taxable does not mean paying 9%. The first AED 375,000 of taxable income is taxed at 0%. The rates are on the corporate tax in the UAE page. This page only answers who is in and who is out.
Resident persons
The law treats these as residents:
- UAE juridical persons, including free zone persons.
- Foreign juridical persons that are effectively managed and controlled in the UAE.
- Natural persons who conduct a business or business activity in the UAE.
Source: Federal Decree-Law No. 47, Article 11, checked .
Non resident persons
A non resident is taxable if it has any of these:
- A permanent establishment in the UAE.
- UAE sourced income.
- A nexus in the UAE set by the Cabinet.
Withholding tax on state sourced income of non residents is 0%, unless a Cabinet decision sets another rate. Source: Federal Decree-Law No. 47, Articles 11 and 45, checked .
Exempt persons
Article 4 of the law lists exempt persons:
- Government entities and government controlled entities.
- Extractive and non extractive natural resource businesses, if conditions are met.
- Qualifying public benefit entities.
- Qualifying investment funds.
- Public or private pension and social security funds.
Each group has conditions. An exempt person must keep records that show its status for 7 years. An exempt person that registers may also need to file an annual declaration, and late or missing declarations carry a penalty. See corporate tax penalties.
Source: Federal Decree-Law No. 47, Articles 4 and 56, checked .
Individuals
An individual is taxed on business activity only when turnover from UAE business activity is above AED 1 million in a Gregorian calendar year starting on or after . Turnover below that level is outside corporate tax. The turnover test is about the business, so a salary does not count toward it.
A resident individual above the threshold registers by 31 March of the following calendar year. A non resident individual registers within 3 months of meeting the requirements.
We could not verify the Cabinet decision number that sets the threshold. The figure comes from FTA guidance and search extracts, so check the current rule on the FTA site.
Source: Federal Tax Authority, basis of taxation for natural persons and CT General Guide, checked .
Free zone persons
A free zone company is a resident juridical person and must register. It is taxed in one of two ways:
| Status | Treatment |
|---|---|
| Qualifying Free Zone Person | 0% on Qualifying Income, 9% on other taxable income |
| Not qualifying | Normal rates: 0% up to AED 375,000, 9% above |
To qualify, the company needs adequate substance in the UAE, Qualifying Income, no election to be taxed normally, compliance with arm's length and transfer pricing rules, and audited financial statements. Failing a condition can cost the status for the current period and the next 4 periods. The full test is on the qualifying free zone person page.
Source: Federal Decree-Law No. 47, Article 18, and Ministerial Decision No. 229, checked .
Tax groups
Related UAE companies can form a tax group and file one return through the parent. The conditions:
- The parent and the subsidiaries are resident juridical persons.
- The parent owns at least 95% of share capital, holds at least 95% of voting rights and is entitled to at least 95% of profits and net assets of each subsidiary.
- No member is an exempt person or a Qualifying Free Zone Person.
A tax group prepares audited special purpose financial statements under FTA Decision No. 7, for tax periods starting on or after .
Source: Federal Decree-Law No. 47, Articles 40 and 53, and FTA Decision No. 7, checked .
Small business relief
A resident taxable person with revenue of AED 3,000,000 or less in the current and all previous tax periods can elect to be treated as having no taxable income. It is not open to Qualifying Free Zone Persons or to members of very large multinational groups. Details are on small business relief.
Not sure where you fit
If your structure has a free zone entity, a foreign parent or an individual owner with several activities, ask a corporate tax consultant to check it. The quote form on this page sends your question to firms in the directory.
