Who is Subject to Corporate Tax in UAE?
The UAE implemented its Corporate Tax regime on 1st June 2023 under Federal Decree-Law No. 47 of 2022. With this, businesses operating in the UAE must assess whether they are subject to Corporate Tax, what rate applies, and what their compliance responsibilities are.
Here, we explain who is subject to Corporate Tax in the UAE, covering all types of persons, businesses, and activities included or excluded under the law.
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👨⚖️ Legal Basis
Corporate Tax in the UAE is governed by:
• Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses
• Cabinet and Ministerial Decisions
• FTA Public Clarifications and Guides
The Federal Tax Authority (FTA) administers, enforces, and collects Corporate Tax.
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🧍♂️ Who is a “Taxable Person”?
A Taxable Person under the UAE Corporate Tax Law can be either a:
• Resident Person (UAE-based businesses and individuals conducting business)
• Non-Resident Person (foreign companies with UAE-sourced income or Permanent Establishment)
Let’s break them down in detail.
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🏢 1. Resident Persons
A Resident Person is subject to UAE Corporate Tax on their worldwide income, unless specifically exempt.
The following fall under this category:
a) UAE Incorporated Companies
• Companies established in the UAE mainland or Free Zones
• Subject to 0% or 9% tax based on structure and income type
b) Foreign Companies Managed from the UAE
• A foreign entity whose effective place of management is in the UAE (e.g., decisions made by UAE-based directors)
c) Natural Persons Conducting Business
• Sole proprietors or freelancers holding a commercial license and conducting business in the UAE
• Only income related to the business activity is taxable (not personal salary or investment income)
d) Unincorporated Partnerships
• Depending on structure, they may be taxed as a single entity or as individual partners
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🌍 2. Non-Resident Persons
Non-resident persons are taxed only on UAE-sourced income or income connected to a Permanent Establishment (PE) in the UAE.
This includes:
a) Foreign Companies with a PE in UAE
• A PE is a fixed place of business through which part or all of the foreign company’s operations are conducted in the UAE
Examples:
• A branch office or project site
• An agent habitually concluding contracts on behalf of the foreign business
b) Foreign Companies with UAE-Sourced Income
• Even without a PE, certain UAE-source income (e.g., royalties, interest, service fees) may be subject to withholding tax (though currently set at 0%)
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🏗️ 3. Free Zone Persons
Entities registered in UAE Free Zones are considered Taxable Persons, but may benefit from a 0% Corporate Tax rate if they qualify as a Qualifying Free Zone Person (QFZP).
To qualify for the 0% rate, a Free Zone Person must:
• Maintain adequate economic substance in the UAE
• Derive Qualifying Income (e.g., exports, inter-group services, warehousing, etc.)
• Prepare audited financial statements
• Comply with transfer pricing rules
• Not elect to be taxed under the standard regime
⚠️ Non-qualifying income will be subject to 9% tax.
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🛑 4. Exempt Persons
The following are not subject to Corporate Tax, unless they conduct non-exempt activities:
• Government entities
• Government-controlled entities
• Qualifying public benefit entities (e.g., charities, non-profits)
• Qualifying investment funds
• Natural resource businesses (already taxed at the Emirate level)
📌 Note: Most exempt persons are still required to register with the FTA for Corporate Tax purposes.
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📋 Summary Table
Type of Person Subject to CT? Scope
UAE Mainland Company ✅ Yes Worldwide income
Free Zone Entity (QFZP) ✅ Yes (0% on qualifying income) Limited income
Foreign Company with PE ✅ Yes UAE income via PE
Foreign Company with UAE-sourced income ✅ Yes (0% WHT currently) UAE-sourced income
Natural Person with Business License ✅ Yes Business income only
Exempt Entity ❌ No Only if qualifying
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💡 Why This Matters
Understanding whether your business is subject to Corporate Tax is crucial for:
• Registering on time with the FTA
• Avoiding penalties and interest
• Planning finances and structure efficiently
• Ensuring correct filing and documentation
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🧾 Our Services at Sheikh Anwar Accounting and Auditing LLC
We help you determine your tax obligations and remain fully compliant. Our services include:
✅ Corporate Tax registration and advisory
✅ Qualifying Free Zone Person analysis
✅ Natural person tax exposure review
✅ Permanent Establishment evaluation
✅ Tax return preparation and filing
✅ FTA audit support
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📞 Get Expert Help Today
🌐 www.sa-auditors.com
✉️ info@sa-auditors.com | 📱 +971-XXX-XXXX
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