From the Inside Out.
"An audit is not a formality — it is the most credible independent signal you can give the world that your financial statements accurately reflect the reality of your business.""UAE Corporate Tax is no longer a future concern — it is a current compliance obligation. The businesses that manage it proactively will have a structural advantage over those that do not."
— Finerio Direct Tax Practice
UAE Corporate Tax Is Here. Are You Ready? Your Numbers Are True
Direct Tax refers to taxes levied directly on the income or profits of a person or business — the most significant of which, in the UAE, is now Corporate Tax (CT). Effective for financial years starting on or after 1 June 2023, the UAE Federal Corporate Tax at a standard rate of 9% on taxable income above AED 375,000 fundamentally changed the tax landscape for businesses operating in the UAE.
For most businesses, the shift from a zero-tax environment to a structured corporate tax regime requires new thinking: What counts as taxable income? Which entities are exempt? How do group relief rules work? What can legitimately be deducted? What are the filing deadlines and penalties for non-compliance? These are not questions businesses can afford to get wrong — the FTA has significant audit and penalty powers.
Finerio's Direct Tax practice brings together corporate tax specialists with deep UAE regulatory knowledge — providing practical, commercially grounded advice that keeps you compliant, avoids unnecessary tax exposure, and identifies every legitimate relief and exemption available to your business.
The financial statements audit — by many names
Finance teams, regulators, and advisors describe direct tax services using a range of terms — all relating to taxes on business profits and income.
The Key Facts Every Business Must Know
A plain-language summary of the UAE Corporate Tax regime — effective for financial years starting on or after 1 June 2023.
1. Standard Rate: 9%
Corporate Tax applies at 9% on taxable income exceeding AED 375,000. Taxable income up to AED 375,000 is taxed at 0% — providing relief for small businesses and startups.
2. When It Applies
CT applies for financial years starting on or after 1 June 2023. A company with a calendar year end (December) was first subject to CT for its financial year ending 31 December 2024.
3. Who Must Register
All UAE-incorporated legal entities — including free zone companies — must register for Corporate Tax with the FTA, regardless of whether they are liable to pay tax. Penalties apply for late registration.
4. Free Zone Companies
Free zone entities may qualify for a 0% CT rate on "Qualifying Income" if they meet the conditions of a Qualifying Free Zone Person (QFZP) — including substance requirements and not deriving income from mainland UAE sources.
5. Tax Groups
UAE resident companies under common ownership (95%+) may elect to form a Tax Group — filing a single CT return for the entire group and allowing losses to be offset within the group.
6. FTA Penalties
Penalties apply for late registration, late filing, late payment, and failure to maintain adequate accounting records. Proactive compliance management is far less costly than remedial action after a penalty is issued.
What We Do For You
End-to-end direct tax advisory and compliance — from registering with the FTA to filing your Corporate Tax return, managing ESR obligations, and representing you in FTA interactions.
The Direct Tax Questions UAE Businesses Face
A plain-language guide to the most common direct tax issues our clients bring to us — and the advisory we provide.
What counts as taxable income?
Not all income in your P&L is taxable. Dividends from qualifying participations, capital gains on qualifying shareholdings, and income of Qualifying Free Zone Persons may be exempt. We identify every item of exempt income — so you pay tax only on what is truly taxable.
Which expenses are deductible?
The UAE CT regime disallows certain expenses — entertainment above 50% of cost, fines and penalties, personal expenses, and payments to related parties not at arm's length. We review your cost base and identify any adjustments required to arrive at the correct taxable income figure.
Does my free zone company still qualify for 0% CT?
Free zone companies are not automatically exempt from CT. To qualify for 0% on qualifying income, they must meet specific conditions — adequate substance, non-excluded activities, and clean financial statements. We assess each condition and advise on any steps needed to maintain or recover qualifying status.
How does interest deductibility work?
The UAE CT regime caps interest deductibility at the higher of AED 12 million or 30% of EBITDA. Businesses with significant debt financing — particularly holding companies — need to model the impact of this rule on their deductible interest and plan accordingly.
Can I carry forward my losses?
Tax losses can be carried forward indefinitely and offset against up to 75% of taxable income in future years. We ensure losses are correctly calculated, claimed, and tracked — so they are available when your business returns to profitability.
What are the accounting records I must maintain?
The UAE CT law requires businesses to maintain audited financial statements and supporting accounting records for a minimum of 7 years. We advise on record-keeping requirements and ensure your accounting function produces the documentation the FTA would require during an audit.
Am I eligible for Small Business Relief?
Businesses with annual revenue not exceeding AED 3 million (for tax periods ending before 31 December 2026) may elect for Small Business Relief — treating their taxable income as nil. We assess eligibility, advise on the election decision, and manage the notification to the FTA.
How do related party transactions affect my CT?
Transactions between related parties must be conducted at arm's length — on the same commercial terms that would apply between unrelated parties. Failure to apply the arm's length principle can result in FTA adjustments. We review related party transactions and ensure pricing is defensible.
Questions we hear from clients every week.
Plain-language answers to the most common questions about UAE Corporate Tax and direct tax advisory.
All UAE-incorporated legal entities — onshore and free zone — must register for Corporate Tax. However, not all will pay tax. The 0% rate applies to taxable income up to AED 375,000. Free zone companies that meet the Qualifying Free Zone Person (QFZP) conditions pay 0% on qualifying income. Government entities, qualifying public benefit organisations, and qualifying investment funds are broadly exempt. All others pay 9% on taxable income above AED 375,000. The key point is: even if you owe no tax, you must still register, file, and maintain compliant records.
Yes — free zone companies are within the scope of UAE CT. However, they may qualify for the 0% rate on Qualifying Income if they meet the conditions of a Qualifying Free Zone Person (QFZP). These conditions include: maintaining adequate economic substance in the UAE; earning qualifying income (income from transactions with other free zone persons or from qualifying activities); not having elected out of the free zone regime; and having financial statements audited. Income from mainland UAE sources, certain excluded activities, and income from transactions with UAE resident non-free-zone persons may not qualify. A careful assessment of each income stream is essential.
The CT return must be filed with the FTA within 9 months of the end of the relevant tax period. So for a company with a financial year ending 31 December 2024, the CT return is due by 30 September 2025. Corporate Tax must also be paid by the same date. Late filing and late payment attract FTA penalties. We manage compliance calendars for all clients — no deadline is missed.
The Participation Exemption allows UAE businesses to receive dividends and capital gains from qualifying shareholdings free of Corporate Tax. To qualify, the UAE company must hold at least a 5% shareholding in the subsidiary, have held it for at least 12 months, and the subsidiary must be subject to a minimum 9% tax rate in its jurisdiction (or meet certain other conditions). This exemption is critically important for holding companies and investment businesses — correctly identifying qualifying participations can significantly reduce taxable income.
Economic Substance Regulations (ESR) were introduced in 2019 and require UAE entities carrying on certain "Relevant Activities" to demonstrate genuine economic substance in the UAE — meaning the activity is actually being managed and conducted in the UAE, not just registered here. Relevant Activities include: banking, insurance, investment fund management, lease-finance, headquarters, shipping, holding company, intellectual property, and distribution & service centre activities. Entities carrying on a Relevant Activity must file an ESR Notification and, if they earn income from that activity, an ESR Report. Non-compliance attracts significant penalties.
They are entirely different taxes. Corporate Tax is a direct tax on your company's profits — calculated annually on your taxable income and paid once a year. VAT is an indirect tax on the sale of goods and services — collected from customers at each transaction and remitted to the FTA periodically (usually quarterly). They are administered separately, filed on different schedules, and managed by different parts of your finance function. Many businesses were already managing VAT when CT was introduced — CT adds a new, separate compliance obligation on top.
Ready to manage your UAE Corporate Tax?
Whether you need to register, file your first CT return, assess your free zone status, or get a health check on your current position — our direct tax team is ready to help.