Although the regulations of the seven emirates and their free zones are similar, businesses must be aware of their unique tax and reporting obligations to guarantee that they always comply. This tutorial covers the accounting and tax aspects of beginning a business in the United Arab Emirates, allowing you to plan your next course of action confidently.

Company Registration in Dubai, UAE

Setting up a business in Dubai involves registering with the UAE business registry and understanding the specific legal and tax frameworks that apply. While the general regulations are consistent across the emirates, each free zone has its own rules, incentives, and compliance requirements.

An overview of corporation tax law in  UAE

With a few exceptions, most companies in the United Arab Emirates are subject to corporation tax. In general, this encompasses the following “taxable persons”:

• Companies and other legal entities that are incorporated or successfully run and governed in the United Arab Emirates
• In the United Arab Emirates, natural persons (individuals) that engage in a specific business or business activity
• Foreign legal entities with a permanent presence in the United Arab Emirates that are non-resident juridical persons

Although some may be excluded if specific requirements set by the Federal Tax Authority (FTA) are fulfilled, businesses founded in UAE free zones—the bulk of which are in Dubai—are likewise subject to corporation tax.

The UAE taxes income on both a residency and source basis by the tax laws of the majority of nations:

• According to the UAE Corporate Tax Law, a “resident person” is subject to taxation on both domestic and international income.
• Only income earned within the United Arab Emirates will be subject to taxation for a “non-resident person.”

Rate of corporate taxes

The UAE established a statutory rate of 9% on taxable income over AED350,000 to simplify its business tax system. Income below this amount is exempt from taxes.

Exemptions from taxes and eligible free zones

In the UAE, some entities may be immediately eligible for corporate tax exemptions, while others may need to fulfil certain requirements. These comprise, among others, government agencies, companies engaged in extractive industries, eligible investment funds, and companies that do not extract natural resources.

Additionally, organizations operating in the UAE free zone that meet specific requirements may be eligible to be classified as Qualifying Free Zone Persons (QFZPs), which entitles them to 0% corporate tax on their qualifying income.

Additionally, some forms of income are not subject to corporate tax. The primary goal is to prevent double taxes.

Deadlines and procedures for filing

All corporations registered for corporate tax are required to file their return and, if necessary, any supporting paperwork related to transfer pricing within nine months of the conclusion of the appropriate tax period. Any UAE corporate taxes due must also be paid within this time frame.

For instance, if your business’s fiscal year finishes on December 31, your tax reporting date would be September 30 of the following year.

In the United Arab Emirates, businesses must retain all pertinent records and papers for seven years following the conclusion of the relevant tax period. This guarantees compliance with UAE tax laws and facilitates any upcoming audits.

Economic substance

The UAE implemented the Economic Substance Regulations (ESR) in 2019 to combat tax evasion. This framework requires businesses involved in particular “relevant activities” to prove that they have a sizable economic presence in the nation.

These restrictions apply to banking, insurance, investment fund management, lease financing, headquarters operations, shipping, holding company duties, intellectual property management, and distribution and service centres companies subject to the ESR regulations must submit a notification within six months of the fiscal year’s conclusion. The authorized regulatory body must also receive an Economic Substance Report within 12 months of the fiscal year’s conclusion.

Those whose financial periods begin on or after January 1, 2023, will no longer be subject to the ESR obligations as of September 2024. Companies must maintain ESR compliance for fiscal years beginning January 1, 2019, and ending December 31, 2022.

Other significant UAE taxes

When running a business in the UAE, you also need to prepare for other vital taxes, such as VAT, excise tax, customs fees, and corporate income tax.

Multinational corporations’ domestic minimum top-up tax (DMTT)

The UAE imposed a 15% DMTT on January 1, 2025. Large multinational corporations with consolidated worldwide revenues of at least €750 million in at least two of the four fiscal years prior are subject to this requirement.

This puts the UAE in line with the Base Erosion and Proft Shifting (BEPS) project’s Pillar Two, the OECD’s global minimum corporate tax agreement, which mandates that big multinational businesses (MNEs) pay a minimum effective tax rate of 15% on their worldwide earnings.

VAT, or value-added tax

The UAE implemented VAT in January 2018; most goods and services are currently subject to the standard 5% VAT rate. However, some goods and services are exempt from VAT, while others have a 0% rate for exports outside the Gulf Cooperation Council (GCC).

The Common VAT Agreement of the Gulf Cooperation Council (GCC) States is the foundation for UAE VAT laws. The FTA, however, is in charge of directly managing VAT in the United Arab Emirates.

If your local taxable supply and imports surpass the statutory registration threshold of AED375,000 per year, you must register for VAT. If the combined amount of your company’s local taxable supply and imports during a fiscal period exceeds AED187,500, you may also volunteer to register for VAT in the UAE.

Following confirmation that you must register in the United Arab Emirates, you must collect the necessary paperwork, including trade licenses, local sales and purchase confirmations (contracts and invoices), and bank account information for your application. The approval process often takes up to a month, and VAT registration is done online through the FTA website.

Entities in free zones are subject to the same VAT registration and compliance requirements as “mainland” entities. Special regulations for the VAT treatment of the delivery of products to, from, and within certain free zones apply since these areas are designated zones for VAT purposes.

Individual income tax

Individuals are not subject to personal income tax in the United Arab Emirates, so there are no reporting requirements. This is one of the more alluring aspects of relocating to the United Arab Emirates for many talented workers and foreign professionals.

Comprehending UAE double taxation agreements (DTAs)

A bilateral agreement between two nations to prevent income double taxation is known as a DTA. By lowering the overall tax burden, the UAE hopes to promote foreign investment and draw in more foreign companies through its vast network of more than 130 DTAs. The UAE has DTAs with several nations, including Saudi Arabia, China, India, and Switzerland.

Businesses established in the UAE can benefit significantly from the DTAs. They guarantee that income is exempt from taxes in both the United Arab Emirates and the nation of origin of your business. These agreements facilitate international operations by streamlining regulations for cross-border investment and trade. The DTAs are advantageous to foreign and domestic companies operating in the UAE.

DTAs for the UAE usually contain clauses that define tax residency and permanent establishment, divide taxation rights between the two nations for various income sources, including dividends, interest, royalties, and capital gains, and specify ways to avoid double taxation through exemptions or tax credits.

IFRS and conformity with UAE accounting norms

After you have a clear understanding of your company’s tax obligations in the UAE, you must ensure that it reports to the FTA in the proper way. The UAE Commercial Companies Law mandates that businesses use the International Financial Reporting Standards (IFRS).

A company in the United Arab Emirates may use IFRS for SMEs rather than the complete IFRS standards if it satisfies the requirements for small and medium-sized entities. This is especially important for businesses that make less money and have simpler operations.

Islamic financial institutions operating in the United Arab Emirates are required to adhere to Sharia-compliant accounting requirements. In addition to using IFRS for financial reporting, businesses also need to follow the criteria set by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI). Non-financial businesses involved in Sharia-compliant operations may also implement these guidelines to guarantee compliance.

Since revenue and expenses are recognized using the accrual method, transactions are noted as soon as they happen rather than when money is collected or paid. The UAE corporation tax policy may provide streamlined compliance requirements or specific exemptions for organizations with yearly revenue under AED 3 million. By meeting this criterion, smaller organizations may be able to bypass more stringent reporting and audit requirements.

Next actions

Since the UAE’s tax rules are still in their infancy, they could be amended or clarified. If your company is unfamiliar with any of the most recent advancements, it is in danger of non-compliance. Standard errors include errors in determining tax liabilities, neglecting to maintain current records, and missing significant tax filing deadlines.

Our staff at GERAI LTD can assist you with tax, accounting, and bookkeeping services to help guarantee your operations in the UAE are entirely compliant. We can help you navigate complicated filing requirements, provide business-specific tax planning methods, and quickly handle various difficulties. Get in touch with our staff right now to learn more about our accounting and tax solutions selection.