Corporate Tax Exemptions Explained

With taxation in the UAE now introduced to local businesses, a question we have been frequently asked is: are there any exemptions?

Within corporate finance, there are opportunities for businesses to minimize their obligations and improve their cash flow, and the UAE is no different. Here, there are corporate tax exemptions that allow qualifying business owners relief from the tax.

Here, we will highlight some of the key tax exemptions currently in place in the country.

  1. Anything government-related. This applies to both government entities and government-controlled entities. Essentially, the 9% corporate tax only applies to the private sector, with anything public sector exempt. This will likely not have any impact on your business operations, but it’s worth knowing.
  2. Natural resource businesses. Businesses involved in the extraction of natural resources have actually been subject to their own taxation rules for a lot longer than the rest of the country. This is because there is more of a global vision for this industry, as it competes with markets across the world rather than locally. If your business is involved in the extraction of natural resources, there will be no change as a result of the corporate tax.
  3. Any business earning under AED 375,000. The corporate tax is only applicable to businesses that earn above AED 375,000 per tax year. If your business generates less than AED 375,000 a year, it will not be subject to the tax. This is the case for both freelancers and business owners. If you do earn above the threshold, only what is earned above that number is subject to the tax.
  4. Currently, Free Zones. The 9% corporate tax is being rolled out in phases, meaning free zone companies are not currently subject to it. At the moment, it’s only relevant to mainland companies, with announcements expected on Free Zone eligibility in the future. Once an update is provided by the Ministry of Finance, we will share the announcement on our website.
  5. Small Businesses Eligible for Small Business Relief. Until December 31st 2026, the UAE government are offering small business relief for companies with revenue below AED 3,000,000. Your business may well be eligible for the relief, so it’s worth checking with the Ministry of Finance as cases are circumstantial.

We are currently offering business owners a complimentary corporate tax consultation, to ensure you’re up to date with your obligations. Reach out to our team if you have any doubts and we will be more than happy to clear them up for you.

Connect with the team by calling 800 BIZ or email us at setup@bizincorp.ae.

The UAE Corporate Tax: Why Business Will Continue To Thrive In The Region

So, the fun’s over. The ‘tax free’ tagline can be put to rest, as businesses across Dubai will now see their profits above AED 375,000 subject to a 9% corporate tax for the first time in the UAE.

You may be wondering whether this will have an impact on your business prospects, or whether it’s as appealing now to start a business as it was before the tax?

Well, this is my case to inform you not to panic, and to remind you that the UAE will 100% remain one of the most thriving business hubs in the world. If you’re still unsure about this, let me build my case.

  • The Tax Rate for businesses is actually still pretty low globally

Before you start to think that a 9% tax is enough to put you off your business venture, it is worth viewing this introduction in context. This level of tax is well below the 23% global average, and will be the envy of many of the working world. While the tagline ‘tax free’ now needs revising, there’s still a huge appeal for business owners starting their new enterprise in the country.

While it might be a slight jolt to the system, comparatively we still have an enviable taxation rate.

  • The barriers to entry remain low

The UAE has established itself as a hub for foreign investment and business opportunities, thanks to its strategic location, world-class infrastructure, and ease of launching a business. The country has implemented policies and initiatives to reduce bureaucracy, simplify procedures, and streamline processes that make it easier for entrepreneurship to thrive.

Entrepreneurs can swiftly establish their ventures, accessing a diverse and dynamic market with minimal red tape. The low barriers to entry ensure that businesses can efficiently establish themselves and focus on growth and innovation. No amount of tax can replace the freedom to do business on your own accord, without too much intervention.

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  • The region remains politically and economically stable

Ironically, the economic stability that the UAE moves towards is a result of moves such as the 9% corporate tax.

It’s always been critical for the UAE to diversify its revenue sources as the finite oil resource the country built its wealth upon depletes. The UAE will still have plenty of this resource to run down, but they’ve been aware for a long time that the money needs to come in from elsewhere. A booming tourism industry and diversification towards a lower level of taxation is a sure way of boosting stability in the region.

It’s worth noting that politically, too, the UAE has played a masterstroke in its positioning. Rather than sitting on any one side of the fence when it comes to political issues, the country often plays the role of mediator between countries looking to resolve disputes. Arguably a result of the stable monarchy that governs the UAE, this level of neutrality allows for the country to not get drawn into complex issues that could destabilize the system.

  • Market access and strategic positioning is always a USP

There’s one thing that will never change about the UAE – its location. At the fulcrum point that connects European and Asian markets, Dubai is a crossroads between East and West, and its placement makes it very appealing for business owners looking for access to diversified markets.

From Hong Kong in the east to London in the west, Dubai is centrally located, with a thriving and diverse market at its fingertips. I don’t foresee a 9% taxation on profits above AED 375,000 derailing that.

Hopefully, these points alone are enough to put your mind at ease about the introduction of the corporate tax. We’re still very fortunate in this region to have such a low taxation rate, and I genuinely do believe that the country will continue to thrive.

If you want a piece of the action in the UAE, my team are ready to help you realize your business dream. Contact us by calling 800 BIZ, or email us at setup@bizincorp.com to start a conversation about entrepreneurship.

Navigating the UAE’s New 9% Corporate Tax

Setting up a business involves negotiating a labyrinth of rules and regulations, especially when it comes to tax laws. At the Business Incorporation Zone, we’re here to help guide you through these complexities, particularly with the introduction of the UAE’s new 9% corporate tax. 

This change, announced in 2022, has come into effect from June 1, 2023. It sets a 9% tax on profits exceeding AED 375,000 ($102,000). However, don’t fret if this sounds intimidating. This change is designed to foster the growth of small and medium-sized businesses like yours. 

Understanding the Corporate Tax 

The 9% tax will only be levied on profits above the AED 375,000 threshold, meaning you won’t be taxed for earnings below this. This encourages the growth of small businesses and startups, and you can quickly estimate your possible tax liabilities using our online tax calculator

Corporate Tax for Residents & Non-Residents 

If you’re a UAE resident, the new tax law offers certain exemptions. For instance, if you’re a freelancer earning above the AED 375,000 threshold, you will have to pay corporate tax. But remember, income from bank deposits, savings and investment programs, dividends, foreign exchange gains, or real estate income from economic activities won’t be taxed. 

For non-residents with an establishment in the UAE, corporate tax will also apply, although exemptions exist for income from operating aircraft and ships in international space or earnings via an investment manager on real estate or other investments. 

Implications for UAE Free Zone Businesses 

The new tax law has important consequences for businesses in UAE’s free zones, crucial to the country’s international trade. But don’t worry, the law is designed to align with the UAE Government’s economic reform agenda. If you comply with transfer pricing rules and maintain relevant documentation, your business may benefit from significant exemptions. 

Decoding Permanent Establishment and Corporate Tax Rates 

Permanent Establishment is a term you might come across often. In simple terms, it’s about whether a foreign entity has a strong enough presence in the UAE to warrant being taxed. The new tax law imposes a 9% corporate tax rate on taxable profits above AED 375,000. 

Understanding the Withholding Tax Rate and Free Zone Conditions 

You may also hear the term “withholding tax”. This is a tax that applies to certain types of UAE sourced income paid to non-residents. However, it’s set at a 0% rate, meaning, in practice, no withholding tax is due, simplifying things for UAE businesses and foreign recipients of UAE sourced income. 

Finally, for businesses in the Free Zone, the tax law provides preferential conditions under certain criteria, potentially offering a 0% tax rate on their “Qualifying Income”. 

Always Here to Help 

While this might seem a lot to digest, remember we at BIZ are always here to support you. Whether you need help understanding the impact of these new laws on your business, assistance with maintaining the required documents, or advice on how to leverage these changes to maximize your growth potential, we’ve got you covered. 

In addition to this, we can also help with all aspects of your business setup. This includes advising on the optimal location for your business, taking care of all registration paperwork, and even providing post-setup support services. Our team of experts are ready and available to answer any questions or concerns you may have.