1. Corporate Tax Framework in the United Arab Emirates
Federal Decree-Law No. 47 of 2022 introduced a federal corporate tax regime across the UAE. The tax applies to all business activities conducted by legal entities and natural persons with commercial licenses. The tax rate is structured with a statutory 0% rate on taxable income up to AED 375,000, and a 9% rate on taxable net profits exceeding AED 375,000.
2. Small Business Relief (Ministerial Decision No. 73 of 2023)
To protect emerging enterprises, eligible resident taxable persons with gross revenue under AED 3,000,000 in any relevant tax period can elect for Small Business Relief. Under this relief, no corporate tax is payable, and simplified recordkeeping standards apply.
3. Qualifying Free Zone Persons (QFZP) Requirements
Entities incorporated in UAE Free Zones can maintain a 0% corporate tax rate on Qualifying Income provided they: (a) Maintain adequate substance in the Free Zone; (b) Derive Qualifying Income from qualifying activities or transactions with other Free Zone persons; (c) Comply with arm's length transfer pricing rules; and (d) Have audited financial statements.
4. Importance of IFRS-Compliant Accounting Software
Corporate tax taxable income is calculated based on commercial net profit derived from IFRS or IFRS for SMEs compliant financial statements. Using cloud accounting software like LedgerMapz ensures continuous ledger integrity and auditable tax provisioning.
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