Registration and Threshold for Zero Rate Corporate Tax in the UAE

The implementation of the new Corporate Tax (CT) in the UAE continues to progress with new milestones such as the commencement of the registration process and an official announcement of the amount of taxable income that will be subject to 0% tax rate. As our valued clients, we would like to provide you with key highlights of new developments in CT.

Start of Registration

  • The Federal Tax Authority (FTA) opened the registration process for CT from January 2023 to May 2023 for certain categories of companies operating in the UAE and they will receive invitations by e-mail and SMS allowing them to register via the EmaraTax platform. Having said that the registration option is also available in the EmaraTax for many private companies and establishments.
  • All taxpayers (including those in free zones and individuals who conduct business activity) would be required to register for CT, even if the taxable income is below the threshold of AED 375,000 or exempt. It should be highlighted that registration for CT is separate from VAT registration and therefore, irrespective of any VAT registration, taxpayers would need to register for CT separately and obtain a CT registration number.
  • No penalties will be imposed for late registration if it is completed before the due date of filing a first tax return. For instance, if a financial year of a taxpayer runs from 1 January 2023 to 31 December 2023, then the registration for CT (and filing of the first CT return) needs to be completed before 30 September 2024.  However, we recommend that taxpayers should complete the registration for CT as earlier as possible to avoid any surprises.

Threshold for Zero Rate Tax

  • The Cabinet Decision of the UAE was issued on 16 January 2023 to confirm the highly anticipated amount of taxable income that will be subject to a 0% tax rate and it is the first AED 375,000 of taxable income that is subject to 0% with any excess being subject to 9%. For instance, if the taxable income of a taxpayer is AED 500,000 during a tax period, then CT payable would be as follows:
Taxable income (AED)Applicable RateTax Amount (AED)
500,000 11,250
  • The Cabinet Decision also clarifies that taxpayers conducting several business or business activities will only be entitled to a single AED 375,000 amount that benefits from the 0% tax rate. Taxpayers that enter into any arrangement (e.g. artificial separation of business) which essentially results in obtaining the 0% tax rate on more than a single AED 375,000 amount may be subject to rejection of the benefit. However, arrangements that have a valid commercial purpose may still benefit from the AED 375,000 threshold amount for each entity. The FTA will consider all facts and circumstances including but not limited to their financial, economic and organizational links in evaluating arrangements.