Step 1: Determine if Your Business is Subject to Corporate Tax
Since June 1, 2023, the UAE has introduced a federal corporate tax (CT) at a rate of 9% on taxable profits exceeding AED 375,000 (approx. USD 102,000). The tax applies to all legal entities registered in the UAE, as well as foreign companies conducting business in the country.
Step 2: Learn About Exemptions and Thresholds
- Small businesses with profits up to AED 375,000 are exempt.
- Fully exempt: extractive industries (oil, gas), qualifying free zone entities (income from real estate, etc.), non-profit organizations, and pension funds.
- Individuals not engaged in business activities do not pay the tax.
Step 3: Prepare Documents and File a Tax Return
Companies must maintain accounting records and file an annual tax return with the Federal Tax Authority (FTA). The deadline is within 9 months after the end of the financial year. Penalties for late filing or non-payment range from AED 500 to 10,000.
Step 4: Benefit from Free Zone Incentives
Free zone companies that meet conditions (no mainland business, income from permitted activities) can continue to enjoy a 0% rate. However, additional requirements to confirm status will be introduced from 2025.
FAQ
1. Does a free zone company that only serves foreign clients need to pay tax?
Yes, but the 0% rate applies if conditions are met: no permanent establishment on the mainland and income from permitted activities.
2. What is the penalty for not filing a return?
AED 500 to 10,000 per month of delay, plus interest on unpaid tax.
3. Is cryptocurrency income taxable?
Yes, if derived from business activities. For individuals who are not traders, no tax is levied.
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