UAE Corporate Tax: Who Pays, Tax Groups & Exemptions

Who Is Liable for Corporate Tax?

Corporate Tax applies to taxable legal persons such as companies registered in the UAE, and to a natural person carrying on a business if their total business revenue exceeds AED 1,000,000 in a calendar year. Tax is computed on taxable income, not on total sales, and the business must register, file, and pay within the set deadlines.

Tax Groups: Who Files and Pays?

Resident companies meeting the legal conditions may apply to form a tax group treated as a single taxable person. The parent company represents the group before the Federal Tax Authority, files the consolidated return and pays the tax, while members remain jointly liable. Each member must still keep its own records and document inter-company transactions and balances.

Participation Exemption & Exempt Income

Income from a qualifying participation — such as dividends and some share-disposal gains — may be exempt, but not automatically from merely holding shares. Typical conditions: a holding of at least 5% (or an alternative test), held for 12 months or the intention to, and the investee subject to a comparable tax of at least 9%. Review the holding percentage, period, country and nature of income before treating profits as exempt.

Deductible vs Non-Deductible Expenses

An expense is deductible when it relates to the business, is incurred to earn taxable income, is supported by a document and recorded in the right period — e.g. salaries, rent, professional services, insurance and depreciation within the rules. Personal or unrelated expenses, fines, non-qualifying donations and unsupported costs are not deductible. Client and supplier entertainment is usually deductible at 50% subject to conditions.

Reverse Charge on Scrap and Imports

In certain scrap-metal trades between VAT-registered persons, the VAT accounting shifts from the supplier to the registered buyer under set conditions, and the invoice is not treated as an ordinary VAT-inclusive sale. Importing goods from abroad is not automatically the same; import VAT is handled through customs procedures and the VAT return. Verify both parties' registration, the goods and the documents before reporting the transaction.