Dubai has long been known as a tax-friendly business hub with no corporate income tax for most sectors. However, as of June 2023, the United Arab Emirates introduced a Federal Corporate Tax regime that affects companies operating across the country, including Dubai.
This major change is part of the UAE’s commitment to global standards and economic diversification. If you run a business in Dubai or are planning to start one, understanding the new corporate tax framework is critical.
In this blog, we’ll break down everything you need to know about Dubai corporate tax — who it applies to, tax rates, filing deadlines, exemptions, and compliance tips.
What Is Dubai Corporate Tax?
Corporate tax in Dubai is part of a UAE-wide federal tax system implemented from June 1, 2023. The tax applies to the net profits of businesses operating in the UAE, including those in Dubai, Abu Dhabi, Sharjah, and other emirates.
This is a shift from the previous tax-free environment for most companies, except for oil, gas, and foreign banks, which had special tax regimes.
Who Must Pay Dubai Corporate Tax?
The tax applies to:
- All businesses and commercial activities carried out in the UAE mainland and free zones (with some exceptions, see below)
- Companies incorporated or registered in the UAE
- Branches of foreign companies operating in Dubai
- Professional service providers, traders, industrial firms, and other business entities
Important: Some entities are exempt or subject to 0% tax (see below).
Corporate Tax Rates in Dubai and UAE
The UAE Corporate Tax rates are designed to be competitive internationally:
| Taxable Income Bracket | Corporate Tax Rate |
| Up to AED 375,000 | 0% (Tax-free threshold) |
| Above AED 375,000 | 9% |
| Large Multinational Groups | 15% (Global Minimum Tax) |
The AED 375,000 threshold is designed to support small businesses and startups.- The 9% tax applies on profits exceeding this amount.
- Multinational groups with revenues exceeding USD 1 billion fall under a global minimum tax of 15% following OECD rules.
What Income Is Taxed?
- Income earned from business activities within the UAE is taxable.
- Income from foreign sources may be exempt if specific conditions are met (subject to detailed rules).
- Dividends and capital gains are generally exempt unless derived from a UAE business.
Who Is Exempt From Dubai Corporate Tax?
Certain entities and activities are exempt or outside the scope of corporate tax:
- Extractive businesses related to oil and gas (still subject to specific emirate-level taxation)
- Investment funds and public benefit organizations under certain conditions
- Companies operating in UAE Free Zones that comply with regulatory requirements and do not conduct business with the mainland outside allowed thresholds
- Individuals (as personal income tax remains zero in the UAE)
- Government entities and sovereign wealth funds
Corporate Tax Filing and Compliance
Registration
- Businesses must register for corporate tax with the Federal Tax Authority (FTA) online before the deadlines.
Accounting and Record-Keeping
- Accurate bookkeeping of income, expenses, and taxable profits is mandatory.
- Businesses must prepare financial statements in accordance with internationally accepted accounting standards.
Tax Return Filing
- The first tax period starts on or after June 1, 2023.
- Tax returns are due within 9 months of the end of the financial year (e.g., if your financial year ends Dec 31, 2023, the return is due by September 30, 2024).
- Returns and payments are filed electronically via the FTA portal.
Payment Deadlines
- Corporate tax is payable after filing the tax return.
- Advance payments or instalments may apply in certain cases.
Impact on Businesses and How to Prepare
1. Review Your Financials
- Analyze your business profits to understand your tax liability.
- Plan for cash flow to accommodate potential tax payments.
2. Consult a Tax Advisor
- Given the complexity and newness of the system, professional advice is essential to optimize your tax position and compliance.
3. Understand Free Zone Rules
- Many Free Zones offer tax incentives, but companies must ensure they meet regulatory requirements to retain exemptions.
- Engaging with Free Zone authorities is crucial.
4. Implement Accounting Systems
- Invest in or upgrade your accounting and financial reporting software.
- Maintain thorough records to support tax filings and audits.
Common Questions About Dubai Corporate Tax
Is corporate tax applicable to freelancers or sole proprietors?
Most freelancers and sole proprietors pay 0% tax if their profits are below the AED 375,000 threshold. Above this, tax may apply if they are registered as a business entity.
Will UAE personal income tax be introduced?
Currently, the UAE does not impose personal income tax, and there are no announced plans to change this.
How will corporate tax affect foreign investors?
The UAE remains attractive due to competitive rates and exemptions. Corporate tax aligns the UAE with international standards, increasing transparency and credibility.
Are dividends from UAE companies taxable?
Dividends paid to shareholders are generally exempt from corporate tax under UAE law.
Final Thoughts
The introduction of corporate tax in Dubai marks a significant shift, reflecting the UAE’s evolving economy and global integration. While it introduces new obligations, the UAE’s corporate tax remains one of the most competitive globally, with low rates and generous exemptions for small businesses.
If you operate in Dubai or plan to establish a company, now is the time to:
- Understand your tax obligations
- Implement robust accounting systems
- Seek professional tax advice
- Plan ahead for compliance deadlines
By doing so, you’ll ensure a smooth transition into this new era of UAE business taxation, maintaining your competitive edge in the market.
