The UAE 9% Corporate Tax FULL GUIDE - Who ACTUALLY Has to Pay?

there is still a lot of confusion around the new 9% UAE corporate tax that went into effect last year in the year of 2024 this year the Year of 2025 is the first year when you have to file your tax returns and the deadline for that is September of this year to file for last year but still despite the fact that we've already had a full tax here many people still don't understand how this tax actually work works so I have right here in front of me the actual UAE corporate tax law that includes all

of the details around who has to pay this tax who is exempt if anyone at all how the tax is calculated how much you can deduct in salary to pay for yourself as the Director of your company how this affects free zone companies and all the other details that you need to understand about the UA corporate tax if you're running or thinking of running a business here in the UAE are misconceptions around this tax on both sides you have people saying like oh don't worry about the 9% tax it doesn't apply to Free Zone companies

that is complete nonsense and then on the other side you have people saying all the UA is dead now every company has to pay 9% tax which is also not true and because there is so much misinformation you don't know who you can trust you should have the exact same mistrust towards me why should you listen to me over all these other people well it's pretty easy to answer that question because my source is the law directly and if you don't believe me in this video we're going to go through the actual law for all

the important parts that you need to understand about the UA corporate tax and I will show you the literal law as I am going through the so you know that I am not full of crap before we get into the video If you're looking to move to the UAE if you're looking to set up a company here then I recommend that you book a free call with my team down below in the description we have helped more than 400 people setup companies here in the UAE and the reason we got into this business is because

so many other companies other Consultants agents out there simply don't tell their clients everything they need to know they don't register their companies properly we have so many clients who have come to us after using some other companies who did things wrong and then their visa got denied or they didn't get banking or something like that because many agents simply don't know how to do things properly here it's a full service package and the pricing for that is one of the lowest that you will ever find but the service the quality of the service is

higher and pretty much any competitor out there if you don't want to take my word for it just look at our reviews look at other companies reviews and that should tell you the story so if you're interested in moving to Dubai look that free call Down Below in the description so here we have the corporate tax general guide for the United Arab Emirates first thing we want to talk about is who is taxable we find that on Section Five on who is subject to corporate tax here taxable persons so persons subject to corporate tax are

known as taxable persons in Broad terms corporate ta tax applies to jural persons which just means basically companies that are Incorporated in the UAE or foreign jial persons that are effectively managed and controlled in the UAE so two things here number one any company that is registered in the UAE is liable for corporate tax according to this law and that doesn't depend on where that is managed and controlled so this is one downside of UAE companies even if you run that UA company from outside the UAE the corporate tax law of the UAE will still

apply to that company that is the first thing to understand the second thing is that even foreign jural Pur so foreign companies that are effectively managed and controlled in the UAE will be liable for corporate tax so the way management and control is defined in the UA tax law is broadly the same as it is defined in most jurisdiction and we can see here that it says it needs to be determined with regard to the specific facts and circumstances of the jural persons and its activities and a key factor is where commercial and management dis

decisions are made this could be the place where the highest level of decisions that are essential for the management are made this is always a question of fact not question of what it says on paper you might have a company where on paper it says like okay there's some board meetings abroad but the true factual management of the company is from the UAE that company will be manag and control from the UAE in taxable in the UAE so this deals with the case that so many people tell me like oh why can't I just set

up a us LLC and then be exempt from this corporate attacks well it doesn't work because it's not not just UAE Incorporated companies but also foreign companies that are managed and controlled from the UAE that are liable for this tax so outside of this corporate tax also applies to non-resident jural persons or non-resident companies that have a permanent establishment in the UAE so you might have a company whose management and control is elsewhere but you run that company through for a part of the year with a permanent establishment so don't fix place of business in

the UAE corporate tax would also apply usually for the income that is a attributable to that permanent establishment and importantly also it applies to Natural persons who conduct business or activities in the UAE and have a turnover of over a million terms so even if you never set up a company but you run essentially business activities in your personal name that is again not a way to get around this tax so that is who is taxable essentially basically what this means to simplifies any company or any business activity that is run factually actually from the

UAE next does this apply to Free Zone companies we can look here again in the definition of Resident jural persons examples of jural persons that incorporated or otherwise established in the UAE include blah blah blah blah and down here and other entity forms that have a separate legal personality under the applicable UAE main legislation or free zone regulations so yes free zone companies are treated within this definition of jural persons Incorporated within the UAE there are some exceptions we can look here on free zone persons there are some types of activities that are exempt that

are treated as what is called qualifying income but if you just look at the definitions basically most people will not qualify for this so when a free zone person Miss certain conditions it will be considered as a qualifying free zone person and eligible for a 0% corporate tax right here we see qualifying income income derived from transaction with other free zone persons except for income div derived from excluded activities so if you only deal with other free zone companies in the UAE you could be treated as a qualifying free zone person income derived from nonf

free zone persons only in the case of qualifying activities and we can see qualifying activities over here so we have manufacturing of good good materials processing of good materials holding of shares and other Securities ownership management and operations of ships reinsurance fund management wealth and Investment Management headquarters Services treasury Finance distributions good good materials you going to read through this but basically most people watching this video are not going to have these kinds of companies sure if you have a mining company or something like that you could benefit from this and get 0% but most

people like content creators e-commerce businesses software businesses whatever the coor tax will apply to you but the next topic of reliefs is quite important and this is actually something that most people will be able to benefit from we can see this in section 7 reliefs and section 7.2 small business relief so small business relief is provided to eligible UAE businesses and reduces their corporate tax burden and compliance cost in the corporate tax and this is important any eligible tax person with Revenue so Revenue not profit equal to or below 3 million dham in a relevant

tax period and all previous tax periods can elect to be treated as having no taxable income in that period and will not be obliged to calculate its taxable income or complete a full tax return so basically what this means if your revenue for your business totals below 3 mlion dhams around $860,000 you are treated as a small business and you can benefit from this small business relief and you are not going to have any tax liabilities because you will be treated as if you have zero taxable income for your entire business this is very very

important to understand most people watching this video are not making more than $800,000 a year and if you don't you still have 0% tax legally next what type of income is going to be taxable in generally any Revenue any business income you make in the UAE will be taxable there again some exemptions we can see here exempt income domestic dividends dividends and other profit distributions received from a resident person are exempt from corporate tax so if you have another company that is paying dividends to your company so let's say you have a UA company and

that UA company owns let's say a uslc that is also a resident taxable person in the UAE and you pay dividends from that uslc into your UA company there's not going to be any corporate tax on that this is a question that many people have asked me when I've told in my previous videos that I own a UA company as well as a US LLC the US LLC is also taxable in the UAE it is a resident person so there's no tax in between the dividends paid from the uslc to the UAE company so there

is no double tax there and you also have exemptions for for example foreign permanent establishment so if you have a UA resident person with a permanent establishment somewhere else so in a foreign country you can make an election where any income and Associated expenditure in these foreign permanent establishments will be exempt from corporate tax in the UAE but the resident person and the foreign permanent establishments must be treated as separate and independent businesses and also it is important to understand that this exemption will only apply to the foreign permanent establishments which are subject to corporate

tax or tax of similar character to corporate tax in that other foreign country at a rate of not less than 9% so you really cannot escape this 9% corporate tax if you have a UA company and again this again only matters only if you make above 3 million Dam a year in Revenue if you don't make above that then none of these matters because you don't have any taxable income and there's some other ones that are more Niche that you can read about in this section but then talking about deductions so General roughly from reading

this works the same way as deductions would work in any other country but is important that any deductions need to be wholly and exclusively for business purposes and another thing I want to highlight here is this one and entertainment expenditure so entertainment expenditure includes expenditure in connection with meals accommodation Transportation admission fees as well as facilities and equipment used in connection with entertainment that's relating to like entertaining customers shareholders suppliers or business partners and things like this so I've seen people who think that let's say you go out for a meal with a business partner

you can just pay for it with your business card and you can deduct the whole thing the UA it doesn't work like that we can see is that as this type of entertainment often contains a private element that would prevent the expenditure from being wholly and exclusively incurred for business purposes only a 50% deduction is allowed for corporate tax purposes in all cases of this type of expenditure so let's say you're going out for a meal with your business partner who's also your friends or it's kind of a business meeting but kind of not you

can only deduct 50% of that expense in taxes and this is I think different to some countries but that is just good to be aware of that I don't think many people are aware of nondeductible EXP es will be well a bunch of things that makes a lot of sense important thing to knowe dividends and profit distributions or benefits of similar nature paid to an owner of the person so any dividends you pay to yourself any like bonuses Etc cannot be deducted that is important but you can deduct your own salary but there are restrictions

to this so people might think like okay I make 4 million drams why can't I just pay myself a salary of 4 million durhams and then I have no taxable income doesn't quite work that way because we have this rule over here transactions between related parties and connected person and transfer pricing rules so when two parties are closely linked so we have two like related parties so for example here we have your company and yourself who are related parties to each other related parties must apply the arms length principle when entering into a transaction this

means that the price of a transaction between related parties should be the same as if the transaction had taken place between two unrelated independent parties so for example when you're paying yourself a salary from your company you can of course compensate yourself however much you want it is your company's money but for corporate tax purposes you can only pay yourself a salary that is within this arms length principle so practically if you imagine that you hired someone else who's not you to do the job that you do how much salary would you pay them so

there's different estimates now you again you need to speak to a professional an accountant again obviously we can help you you can book our Call to determine exactly how much you would be able to pay but you cannot just pay all of your income all of your Revenue to yourself and think that you can deduct this in taxes doesn't quite work that way in reality they would allow you to deduct whatever is reasonable for your activity your business and then the rest of it would be treated as dividends or bonuses or something that is not

deductible in taxes so finally we need to talk about Administration so who needs to register how to register when to file your taxes things of that nature so we find this here registration and deregistrations all taxable person should register for corporate tax so this means that anyone whether or not you can apply for the small business relief you have to register for corporate tax very important to understand there probably a lot of UI businesses that have not registered because they don't know this because the agent or whoever they use didn't tell them we always tell

our clients like we even do this all for you so you don't need to worry about all of this but that is good to be aware of and I made a previous video on exactly what the deadlines are now the deadlines sort of depend on when you register your company whether you have a UA company or a foreign company so I'm going to direct you to watch that video for all the details on exactly when you should register but basically what I recommend you do is just register as soon as you get your company so

you don't forget or if you use us then we will obviously just do it for you in terms of how to do accounting taxable persons that earn Revenue that does not exceed 3 million durhams may use cash basis for accounting everyone else should use the acrel basis of accounting they do not need to be audited unless you make Revenue more than 50 million durhams a year or unless you are one of these qualifying free zone persons which most of you are not going to be and tax returns will be due within 9 months from the

end of the relevant tax period so for example a taxable person with a financial year ending 31st December is required to file their tax returns and pay corporate tax on or before 30th of September of the following year so for the last year of 2024 by September of 2025 like I mentioned before is the deadline to file and pay for this corporate tax again I would recommend doing this sooner rather than later and will'll make future videos on exactly how this payment is going to be made and things like this because this is the first

year when we have to do this so that covers most of the broad points that you should be aware of regarding the UA coroporate tax I hope that clarifies things again these are not all of the details there's more nuance and things like that you should always speak to an accountant again this is not tax advice not Financial advice just my interpretation of this law that we were looking at in this video and that will also leave down below in the description again if you're looking to move to the UAE you want to set up

a company here and you don't want to deal with all of this yourself you want someone to help you that has done this hundreds of times we have helped more than 400 companies up here in the UAE you get that free call in the first link Down Below in the description and we can help you not only sell up properly but also to keep your business 100% compliant so you don't get into any issues you don't get any fines anything like that with that said if you want more details on how to register for this

corporate tax where I show you exactly how this registration should be done you can watch this video right here and with that I will see you in the next video