The introduction of Federal Corporate Tax in the UAE marks a significant evolution in the country’s business environment. Federal Decree-Law No. (47) of 2022 governs the taxation of corporations and businesses, applying to financial years starting on or after 1 June 2023 across all Emirates.

While the federal framework now governs most corporate and business taxation, certain sectors remain subject to Emirate-level rules. Oil and gas companies and branches of foreign banks continue to be taxed in accordance with existing local Emirate regulations, with only limited interaction with the Federal Corporate Tax system.

With more than 55 years of experience in the UAE market, BDO in the UAE supports organisations in navigating this regulatory landscape, helping them maintain compliance while aligning tax obligations with broader financial and operational objectives.

Scope of Corporate Tax

Corporate Tax applies to taxable persons across business and commercial activities, including Free Zone entities, which are required to register and file Corporate Tax returns.

Tax rates are structured as follows:

• For taxable persons, excluding Qualifying Free Zone Persons:
  • Taxable income up to AED 375,000: 0%
  • Taxable income above AED 375,000: 9%
• For Qualifying Free Zone Persons:
  • Qualifying Income: 0%
  • Non-Qualifying Income: 9%, without the AED 375,000 threshold

Certain entities, including government entities, extractive businesses, public benefit organisations, and qualifying investment funds, may be exempt under specific conditions.

Key considerations for businesses

The Corporate Tax framework includes a number of important considerations for businesses operating in the UAE.

• Taxation based on accounting net profit, subject to prescribed adjustments
• Limitations on interest deductibility
• Carry-forward of tax losses
• Transfer pricing rules aligned with OECD guidelines
• Group taxation provisions

Relief measures remain available for eligible small businesses, allowing them to elect simplified treatment where applicable under current Corporate Tax provisions.

Corporate Tax generally does not apply to personal income unless natural persons derive more than AED 1 million from business activities.

Exemptions and international alignment

Dividends and profit distributions from UAE resident entities are exempt from Corporate Tax. Subject to participation exemption rules, certain foreign dividends and gains from participating interests may also be exempt.

No withholding tax applies to domestic or cross-border payments such as dividends, interest, or royalties. UAE businesses may also claim foreign tax credits where applicable.

Emerging developments

Domestic Minimum Top-up Tax (Pillar Two)

The UAE has issued Cabinet Decision No. (142) of 2024, implementing a Domestic Minimum Top-up Tax (DMTT) and introducing the relevant exclusions, safe harbours, and transitional reliefs. From 1 January 2025, DMTT applies to multinational groups with global turnover exceeding AED 3.15 billion (EUR 750 million). It will apply where a multinational enterprise’s effective tax rate in the UAE falls below 15%.

This development reflects the UAE’s alignment with global minimum tax standards and increasing reporting expectations for multinational enterprises within the scope of Pillar Two.

As DMTT is a recent introduction, BDO can help organisations understand the rules, undertake detailed analysis, and navigate implementation requirements in the first year of application.

Detailed guidance and procedures for DMTT registration, returns, and related compliance obligations have not yet been published by the Federal Tax Authority. Understanding these obligations is essential for businesses seeking to take practical action and prepare effectively.

Advance Pricing Agreement (APA)

The UAE has introduced an Advance Pricing Agreement (APA) framework under the Corporate Tax regime, providing businesses with a structured approach to managing transfer pricing.

An APA is a formal arrangement between a taxpayer and a tax authority that determines the appropriate transfer pricing methodology for specific related-party transactions in advance. In the UAE, APAs are becoming increasingly relevant as transfer pricing regulations align with global standards established by the Organisation for Economic Co-operation and Development.

Initially, the Federal Tax Authority has adopted a phased approach, limiting the programme to unilateral APAs, which are agreements solely between the taxpayer and the Federal Tax Authority. There are plans to expand the framework to bilateral and multilateral arrangements in the future.

With the introduction of Corporate Tax and transfer pricing rules, businesses operating in the UAE can use APAs to gain greater certainty and reduce tax risk.

We support businesses throughout the APA lifecycle, from assessing feasibility and readiness to managing the application and negotiation process with the Federal Tax Authority. Our approach includes developing robust transfer pricing methodologies, preparing documentation in line with UAE regulations and OECD guidelines, and assisting with ongoing compliance, monitoring, and renewals. By combining technical expertise with practical insight, we help organisations use APAs as a strategic tool to enhance tax certainty, manage risk, and support long-term business planning in the UAE.

How BDO in the UAE can help

BDO in the UAE provides compliance, advisory, impact assessment, and audit support to help organisations navigate Corporate Tax requirements at both Federal and Emirate level.

Our partner-led teams assist with:

• Corporate Tax readiness and implementation
• DMTT (Pillar Two) impact assessments, management of information requests from global headquarters, readiness reviews, compliance and reporting implementation, and ongoing support
• Emirate-level taxation matters
• Review of Public-Private Partnership (PPP) financial models from a tax perspective
• Assessment of the obligation to obtain Corporate Tax registration
• Corporate Tax impact assessments across business transactions
• Corporate Tax registration and de-registration support
• Tax provisioning and Corporate Tax filing, including transfer pricing-related disclosures
• Corporate Tax refund support
• Corporate Tax advisory services
• Corporate Tax training
• Corporate Tax manuals and policies
• Corporate Tax health-check reviews
• Assistance with filing private clarifications with the Federal Tax Authority
• Assistance with reconsideration and waiver applications to the Federal Tax Authority
• Audit-ready support before a Federal Tax Authority audit
• Federal Tax Authority audit support
• Tax agency services to represent businesses before the Federal Tax Authority in relation to audits, assessments, objections, and appeals

Why businesses choose BDO in the UAE

• Expertise in UAE Corporate Tax – advising businesses since the introduction of the Corporate Tax law in June 2023
• Free zone specialists – supporting Qualifying Free Zone Persons in maintaining the 0% Corporate Tax rate
• Domestic Minimum Top-up Tax (Pillar Two) readiness support – assisting large multinational enterprise groups with compliance preparation
• Partner-led engagements – senior technical expertise provided throughout the engagement
• Part of BDO’s global network – cross-border Corporate Tax structuring expertise across multiple jurisdictions

Supporting compliance and tax certainty

Our approach helps organisations meet regulatory requirements while maintaining operational efficiency and strengthening confidence in their tax governance framework.