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Corporate Tax in the UAE and Which Categories Are exempted

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The United Arab Emirates wants to accomplish its strategic goals as quickly as possible and expedite its transition, hence the establishment of a corporate tax is designed to assist in these endeavours. Together with the United Arab Emirates' wide network of double tax treaties, the assurance of a competitive Corporate Tax system that complies to international norms would strengthen the United Arab Emirates' position as a leading destination for business and investment in the region.

As a result of the United Arab Emirates' status as a hub for international commerce and a worldwide financial centre, the country's corporate tax system is modelled after the most successful tax systems throughout the world and is based on concepts that are recognised and respected on a global scale. This guarantees that the United Arab Emirates' Corporate Tax structure will be easily understood and that its effects will be crystal evident. Read this article to learn how Fortius, one of the top business corporate tax services in Dubai, can assist you with adhering to the recently approved corporation tax law.

What is meant by corporate tax?

The term "Corporate Tax" refers to a specific kind of direct tax that is applied on the overall profit of enterprises and corporations.

The majority of GCC states, and indeed most countries worldwide, have well-developed CIT systems in place. In order to comply with global tax standards and keep the CT rate competitive globally, the UAE also wants to implement CIT beginning in 2023. The UAE is determined to follow international norms for greater transparency and abolition of harmful tax practices. The decision will unquestionably improve the UAE's position as a leading global hub for commerce and investment and hasten its transformation and growth to achieve its strategic objectives.

Fortius Consulting, a UAE-registered management consultancy firm, specializes in business advisory and consulting services. We help identify business risks and provide incredible business growth opportunities and solutions with qualified chartered accountants. Elevate your business to a global level with us.

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How is corporate tax calculated?

The foundation for figuring out company taxes is accounting for net income. Net income, often called net profit, must include all revenue sources. Costs like operations, interest on loans, depreciation, and amortization must be included as well when determining the true value of any profits.

To calculate your required business tax payment, multiply your taxable income by 9 percent. The taxable income of your firm is also determined by deducting the sum of all business expenses from the entire revenue. Take note that the net income will be calculated in accordance with GAAP.

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Which categories are not subjected to UAE corporate tax in 2023?

The 9 percent corporate tax rate is optional for all UAE firms. Except for companies engaged in the mining of natural resources, the tax rate may vary between 0-15%. Treat the comment with caution until the exact norms and regulations relevant to the UAE company tax law are announced. Every rule or legislation has an exception. Perhaps to more fairly distribute the financial contributions made by each company or to reduce the burden put on a particular group of businesses to operate them.

The revised corporate tax law in the UAE relieves some entities, including persons, by preventing them from paying taxes and raising the rate for enterprises that may earn considerable profits. From June 1, 2023, the UAE will levy a 9 percent tax on both individuals and enterprises. The following list of exemptions are:

1. Individuals who are earning money in the UAE 

  • Revenue derived from one's employment
  • Earnings from economic activities such as contract employment, firms, professions, or other activities that are only lawful if one has a license or authorization to engage in them
  • Earnings from real estate assets provided that these activities are carried out individually and not on behalf of a corporation, which would need the acquisition of a business license.
  • Earnings are derived from any kind of business or economic activity for which, according to the laws of the UAE, a license or any other kind of legal authorization is not necessary.
  • Capital gains, dividend income, and other earnings from investments in stocks and securities all count as capital gains.
  • Gains from deposits in savings accounts and other financial vehicles, including interest

2. Companies headquartered in the United Arab Emirates 

  • Companies that fall under the categories of micro, small, and medium-sized and have annual sales of less than 375,000 Dirham are exempt from paying any company taxes.
  • Businesses that operate within the free trade zone but conduct no business with enterprises situated in the rest of the United Arab Emirates (UAE) are nevertheless eligible to make use of the advantages that come with being in the free trade zone. These benefits include not having to pay income tax or corporation tax.

3. Businesses in Free Zones and the Taxation of Corporations in the UAE 

The new company tax proposal has yet to reveal how it will affect enterprises in free zones. Initial reports suggest that the advantages provided by free trade zones would continue to be recognized under the new tax structure, which would be consistent with the importance of these locations to the economy of the UAE. Free trade zone companies that do not conduct any business on the UAE mainland may still be eligible to reap the advantages that come with being located in a free zone. These benefits include waivers from EXIM taxes, the ability to repatriate one hundred percent of one's profits and capital, and 100% foreign ownership.

Also Read : Everything you should know about corporate tax services in the UAE

4. The Taxation of Businesses in the United Arab Emirates and Offshore Companies

More than 40 additional nations have signed double taxation agreements with the United Arab Emirates (UAE). The Frequently Asked Questions provided by the Ministry of Finance continue to avoid answering the question, "Will UAE offshore firms be subject to tax from 2023 ?" On the other hand, the vast majority of business consultants and organizations in the UAE believe that they would be treated in the same manner as firms operating in other free trade zones.

Are you unsure if your business is exempt from corporate taxes? Get in touch with Fortius Consulting Services. Apart from helping you understand everything about corporate tax, we also help with business consulting and CFO services. Call us today!

Fortius Consulting Services is a trusted name for business consulting and CFO services in the UAE, Singapore and India. Through our expert consulting and advisory services,we assist organisations across the UAE & Asia to boost their profitability, improve operational effectiveness, increase management capability, institutionalise strategies, and upgrade their internal structures.


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