Learn all about UAE corporate tax & VAT with BMS Auditing. Know who must register, tax rates, required documents & stay compliant with expert guidance.
The UAE is renowned for being tax-friendly, and it's where international companies and investors flock. To conform to the international world and set up a solid financial infrastructure, the UAE implemented a Corporate Tax system starting from June 1, 2023. As a top-tier business advisory, BMS Auditing provides an extensive guide to corporate tax in the UAE—what it is, who must register, and how to remain compliant.
Understanding Corporate Tax in the UAE
Corporate Tax, otherwise referred to as Corporate Income Tax is a direct tax imposed on the net income of business organizations. The UAE has one of the lowest rates of corporate tax worldwide, just 9%, and yet it attracts. The framework has exemptions for organizations with minimal income to safeguard and promote small businesses' growth.
The UAE corporate tax is imposed on:
- Mainland businesses
- Free Zone entities
- Foreign businesses with a UAE presence
- Individual professionals/freelancers with income thresholds
UAE Corporate Tax Rates Explained
The corporate tax system has been designed to accommodate both local business and foreign investors. The current tax rates are:
- 0% tax on profits up to AED 375,000 (for small business and startups)
- 9% tax on profits over AED 375,000
For eligible Free Zone entities, the advantages are:
- 0% tax on qualifying income
- 9% tax on non-qualifying income
This difference inspires companies to be in substance and stay within the ambit of approved Free Zone activities.
VAT in the UAE
The Value Added Tax (VAT) regime, implemented on January 1, 2018, is kept distinct from the Corporate Tax. The default VAT rate is 5%, which is levied on most goods and services like eating out, electronics, fashion, and others.
There are, however, some exceptions:
- 0% VAT: Levied on healthcare, education, precious metals (gold/silver), and exports
- VAT Exempt: Covers residential property (sale and lease), passenger transport by road, and certain financial services
It's important to know the difference between taxable, zero-rated, and exempt supplies to properly file VAT.
Who Must Register for Corporate Tax?
Corporate Tax registration is required for a broad array of business structures in the UAE:
- Mainland Companies: All companies that have a DED license must register and adhere.
- Free Zone Entities: Even if Free Zones have some exemptions, most enterprises will still have to register—particularly those that are deriving non-qualifying income.
- Foreign Companies: Any foreign company that has a permanent place of business or substantial economic presence in the UAE will need to register.
- Self-Employed Professionals and Freelancers: Anyone deriving income above AED 375,000 per annum from professional or business activities must register and pay corporation tax.
Documents Required for Corporate Tax Registration
To register your company for Corporate Tax, you will have to provide the following documents:
- Copy of valid Trade License
- Memorandum of Association (MOA) or Articles of Association (AOA)
- Passport copies of all partners or shareholders
- Emirates ID copies of owners or partners
- Contact details of the authorized person (mobile number and email)
- Business address
BMS Auditing guarantees all documents are carefully checked and properly submitted to prevent delays or rejection of applications during the registration process.
Corporate Tax Compliance with BMS Auditing
At BMS Auditing, we help businesses stay compliant with the UAE's evolving tax landscape. From registration to regular filings, we handle the technicalities so you can focus on growing your business. Our tax advisors are well-versed in local laws and international practices, making us the trusted partner for businesses across the UAE.
The introduction of corporate tax in the UAE is a new era for the economic landscape of the country. Although the tax rates are competitive, it's important for companies to know their obligations and stay compliant to avoid penalties.
Are you an established player or setting up business in the UAE? Whatever your needs, BMS Auditing has the knowledge and experience you need to meet tax regulation with confidence. From company tax registration to VAT advisory, we help ensure your business complies with current law and is well-positioned to succeed.
Need expert advice? Contact BMS Auditing today for personalized guidance on corporate tax, VAT compliance, and overall business success in the UAE!
