The amount of Corporate Tax due in a Tax Period is calculated by applying the appropriate Corporate Tax rate to the Taxable Person’s Taxable Income (see Chapter 6).

General tax rates

Corporate Tax applies to Taxable Income at the following rates

Any single Taxable Person only gets to apply a 0% rate to their first AED 375,000 once per Tax Period. This continues to apply where multiple Persons have come together to form a single Taxable Person. If individual companies form a Tax Group, or an Unincorporated Partnership applies to be taxed at the partnership level, only the Taxable Person (i.e. either the Tax Group or the partnership) will be able to apply the 0% rate to the first AED 375,000 of its collective Taxable Income.

For further details on the Taxable Income threshold, readers are advised to consult Cabinet Decision No. 116 of 2022 on the Taxable Income Threshold.

Application of Corporate Tax rates to Tax Groups

If three individual companies had Taxable Income each of AED 5,000,000 then each company would pay tax of AED 416,250, a total of AED 1,248,750. Each company’s Corporate Tax liability calculation would be as follows:

If these companies formed a Tax Group, the Corporate Tax due on their total Taxable

Income of AED 15,000,000 would be AED 1,316,250. The Tax Group’s Corporate Tax liability calculation would be as follows:

Corporate Tax rates for Qualifying Free Zone Persons

Corporate Tax applies to Qualifying Free Zone Persons at the following rates:347

The Corporate Tax rate applied to Qualifying Free Zone Persons depends on whether income is Qualifying Income or not (see Section 5.5).

A Qualifying Free Zone Person is subject to the standard 9% Corporate Tax rate without being disqualified from the Free Zone regime on the following income:

• Income that is attributable to a domestic or a foreign Permanent Establishment;348
• Income derived from Commercial Property located in a Free Zone where the transaction is with a Person who is not a Free Zone Person;349 and
• Income derived from residential and other non-Commercial Property located in a Free Zone.350

Income from these above sources is treated as regular Taxable Income that does not benefit from the 0% rate.

Unlike ordinary Taxable Persons, Qualifying Free Zone Persons are not entitled to a 0% rate on their first AED 375,000 of Taxable Income that is not Qualifying Income. Therefore, any Taxable Income that is not Qualifying Income will be subject to tax at the general rate of 9%.

Withholding Tax rate

At the time of enacting the Corporate Tax Law, the rate of Withholding Tax was 0%.351 Withholding Tax should be deducted by a Resident Person from a payment made to a Non-Resident for certain categories of State Sourced Income derived by the Non- Resident Person, and remitted to the FTA. Tax credits are given to Taxable Persons

who have had Withholding Tax deducted from payments to them. (See Section 9.3.1 for more information on Withholding Tax Credit).

As the rate of Withholding Tax is currently 0%, this means that, currently, no tax needs to be withheld.