Preparing for UAE’s Corporate Tax: Steps to Ensure Compliance

The United Arab Emirates has officially entered a new chapter in its fiscal policy. With Federal Decree-Law No. 47 of 2022 on Corporate Tax taking effect from 1 June 2023, companies across the UAE must adapt to a structured corporate tax regime for the first time. For a country long recognized for its tax-free environment, this represents a historic transformation.

The corporate tax rate—set at 9% on profits above AED 375,000 —brings the UAE closer to international tax standards while preserving its reputation as a global hub for investment. But alongside opportunity comes responsibility: businesses must comply with new obligations to avoid penalties and safeguard their credibility.

This guide outlines the essential steps companies should take to prepare for the new corporate tax system and remain fully compliant.

The UAE Corporate Tax Framework at a Glance

Before planning, it is vital to understand the structure of the regime:

• Scope – Applies to all businesses in the UAE, including free zone entities (subject to conditions) and foreign firms with a permanent establishment.

• Exemptions – Natural resource activities, qualifying free zone entities, and government-owned companies may be excluded.

• Global Standards – The framework is consistent with OECD Base Erosion and Profit Shifting (BEPS) principles.

Step 1: Evaluate Your Tax Position

Determine how corporate tax applies to your business:

• Residency – Identify whether you are a UAE-based entity, a branch of a foreign company, or a non-resident with taxable presence.

• Revenue Sources – Separate domestic from foreign income and confirm if any streams qualify for exemptions.

• Thresholds – Calculate taxable income to check if it exceeds AED 375,000.

A clear assessment prevents both underpayment and overpayment of tax, which could impact finances and operations.

Step 2: Register with the Federal Tax Authority

Every taxable entity must register with the UAE Federal Tax Authority (FTA) and obtain a Tax Registration Number (TRN). Even businesses below the threshold must register.

• Application – Submit online via the FTA portal.

• Documentation – Trade license, incorporation documents, ownership structure, and recent financials.

• Timing – Deadlines depend on incorporation and fiscal year; early registration is strongly advised.

Step 3: Reassess Corporate Structures

Corporate tax rules make reviewing your organizational setup a priority:

• Group Relief – Check if you can offset profits and losses within a group.

• Free Zone Incentives – Confirm whether you qualify as a “Qualifying Free Zone Person” eligible for a 0% rate.

• Foreign Entities – Ensure UAE activities do not unintentionally create a taxable permanent establishment.

Professional legal and tax advice is recommended at this stage.

Step 4: Upgrade Accounting and Reporting Systems

Compliance depends on reliable and timely financial data. Businesses should:

• Enhance ERP or accounting systems to separate taxable and exempt income.

• Maintain documentation for all adjustments, deductions, and exemptions.

• Introduce automation where possible to minimize errors and speed up reporting.

Step 5: Know What Expenses Are Deductible

Understanding deductions is crucial:

• Deductible – Salaries, office rent, utilities, travel, depreciation, and some interest costs.

• Non-Deductible – Fines, penalties, dividends, bribes, and certain entertainment costs.

Accurate supporting records must be kept for every deduction.

Step 6: Comply with Transfer Pricing (if Relevant)

Companies dealing with related parties must adhere to OECD-based Transfer Pricing rules:

• Price transactions at arm’s length.

• Maintain Master and Local Files if above revenue thresholds.

• File the TP disclosure form with the annual tax return.

Failure to comply may trigger adjustments and additional liabilities.

Step 7: Train Internal Teams

Compliance requires organization-wide awareness. Key steps include:

• Conducting workshops to explain tax basics.

• Updating company policies for expense claims, invoicing, and intercompany dealings.

• Assigning clear roles for tax management.

Step 8: Set a Compliance Calendar

Mark critical deadlines to avoid penalties:

• Filing annual tax returns.

• Paying tax liabilities.

• Submitting documentation or responding to FTA queries.

Using a compliance calendar with reminders reduces risk of missed obligations.

Penalties for Non-Compliance

The UAE has established clear penalties, such as:

• Fines for late registration, filing, or payments.

• Reassessments increasing tax liability.

• Reputational damage, which can affect partnerships and investor trust.

Looking Ahead

Corporate tax in the UAE is still evolving. In the coming years, businesses can expect:

• Updates to the law based on practical feedback.

• More frequent audits, especially in high-revenue sectors.

• Alignment with international standards for the digital economy.

Firms that adapt early will benefit from smoother compliance and stronger governance.

Conclusion

The UAE’s corporate tax regime represents a significant step toward fiscal sustainability and international credibility. While the 9% rate is competitive, compliance requires preparation, organization, and transparency.

By evaluating your tax position, registering early, upgrading systems, and training staff, your company can navigate this new environment with confidence.

Corporate tax should not be seen only as a cost — it can also enhance governance, improve financial discipline, and strengthen investor confidence. Businesses that act proactively will be best positioned for long-term success.