Income tax is due using a progressive rate system with rates up to 55% under the Emirate-level tax decrees. These tax directives, however, have not been implemented in reality. Rather, separate bank regulations at the Emirate level impose income tax on foreign bank branches at a fixed rate of twenty percent. Individual UAE concession agreements or fiscal letters impose income tax at different rates on businesses involved in petrochemical and oil and gas operations in the UAE.
The Federal UAE Corporate Tax Law will apply to all business and commercial operations in all Emirates and take effect for each taxable person’s new financial year beginning on or after June 1, 2023, with the following exempt individuals (subject to conditions):
- The UAE government entity.
- An entity under government authority in the UAE.
- A person working in the United Arab Emirates in an extractive industry.
- An individual operating in the United Arab Emirates in the non-extractive natural resource sector.
- Public benefit entity qualification.
- An investment fund that qualifies.
- A public pension or social security fund, or a private pension or social security fund that satisfies any additional requirements that the Minister may specify and is subject to regulatory control by the state’s responsible body.
- A juridical person incorporated in the state that certain exempt individuals own and manage in its entirety.
- Any additional individual that the Cabinet decides upon at the Minister’s recommendation.
The following rates will apply to UAE corporate tax:
Taxable income | UAE CT rate (%) |
| 0 |
| 9 |
In the past, the certification of UAE corporate tax residency has been granted by UAE tax authorities on the basis of certain papers filed for legal organizations that are established in the UAE, both on the mainland and in free zones.
Companies and other juridical entities that are incorporated, otherwise constituted, or recognized by the laws of the United Arab Emirates shall be regarded as residents under the UAE Corporate Tax Law. This includes legal entities that were incorporated in the United Arab Emirates in accordance with applicable Free Zone laws or mainland legislation.
If foreign corporations and other legal entities are successfully managed and controlled in the United Arab Emirates, they may also be considered resident entities for the purposes of corporate taxation.
A non-resident person is a taxable person in the United Arab Emirates (UAE) who does not qualify as an individual and/or
- is based in the United Arab Emirates as a permanent establishment (PE).
- receives revenue from the state, or
- maintains a connection to the United Arab Emirates through revenue generated from real estate there.
Permanent Establishment (PE):
The concept of a PE under UAE Corporate Tax Law is consistent with the term found in the Model Tax Convention of the Organization for Economic Co-operation and Development (OECD).
A non-resident person would typically be regarded as having a PE in the United Arab Emirates under the principles of the UAE Corporate Tax legislation where:
- It has a fixed or permanent location in the United Arab Emirates where the non-resident person conducts all or part of its business.
- when an individual possesses and regularly uses their authority to carry out commercial or business-related activities in the United Arab Emirates on behalf of a non-resident individual (i.e., when an individual regularly signs contracts in the non-resident individual’s name or when an individual regularly negotiates contracts that are signed by the non-resident individual without the non-resident individual needing to make material modifications), or
- The non-resident individual possesses any other connection to the United Arab Emirates that may be delineated by a Cabinet resolution.
If a fixed or permanent location in the United Arab Emirates is only utilized for auxiliary or preparatory purposes, it will not be classified as a PE. In the following situations, a non-resident person’s mere presence in the United Arab Emirates will not result in the creation of a PE:
- The reason for this presence is a brief and extraordinary circumstance.
- The natural person works for the non-resident person, and neither the non-resident person nor any of its affiliated parties rely on the natural person’s operations in the United Arab Emirates for their primary source of income.
Furthermore, an investment manager (i.e., an individual who provides brokerage or investment management services subject to regulatory oversight in the United Arab Emirates) may be regarded as an independent agent when acting on behalf of a non-resident individual for the purpose of deciding whether or not the investment manager will create a PE in the United Arab Emirates, thanks to an exemption provided by the UAE Corporate Tax Law. Investment managers who deal with commodities, real estate, bonds, shares, derivatives, securities, or foreign currency, among other things, should be aware of this.