What are the corporate tax rules in Dubai?

What is the Corporate Tax in Dubai?

Corporate tax is exactly as it says - it's company tax that applies to any business activity in the UAE. This includes both corporate structures and freelancers. So if you're in Dubai on a freelancer visa, you're also subject to this tax and need to comply.

The penalties for non-compliance are significant - up to 10,000 AED (around £2,000), so it's crucial to get this right.

What Tax Reliefs are Available?

Many people think that having a free zone company automatically means 0% tax. That's not the case. Here are the three reliefs currently available:

1. Free Zone Exemption

This is the first relief, but most businesses don't qualify. The free zone exemption mainly applies to manufacturing and financial services sectors. For most content creators and online businesses, this exemption isn't available.

2. Small Business Rate Relief

If your turnover is below 3 million AED per year, you can still pay 0% corporation tax. However, this relief is only confirmed until 31st December 2026, and there's no guarantee it will be extended beyond that point.

3. Taxable Income Threshold

After you've calculated your turnover minus expenses, if your profit is below 375,000 AED, you'll pay 0% tax. Anything above this threshold that doesn't qualify for the other reliefs will be taxed at 9%.

Key point: Even if you qualify for 0% tax under any of these reliefs, you still need to file returns to prove your position.

Do I Still Need Tax Planning?

A lot of people go to Dubai thinking "0% tax, brilliant!" But the reality is different. To get to 0% tax, you still need proper tax efficiency and tax planning. Your Dubai business needs commercial reality - it must be a legitimate trade that can stand on its own.

Your Dubai business needs commercial reality. This means following these 4 key principles:

1. Having proper business expenses
   
   
2. Showing real turnover and activity
   
   
3. Following arms length principles (if someone else was doing the same work, what would it cost?)
   
   
4. Maintaining substance in your Dubai operations

What Expenses Can I Claim?

The expense rules in Dubai are very similar to the UK and US. You can claim expenses that are "wholly and exclusively for business purposes" - the same phrase you'll hear around the world.

When Do I Need to File and Get an Audit?

You file through the Emirates tax portal using your UAE pass (linked to your Emirates ID). It works similar to VAT filing in the UAE.

Audit requirements depend on which authority you're operating under. Most free zones now require an audit with the introduction of corporation tax. While these aren't as strict as UK audits, you still need clear records and financial statements that comply with International Financial Reporting Standards.

Some free zones have clauses stating that if you're asked to provide an audit, you must provide it within 30 days. This means you need to maintain proper financial records and have audit-ready accounts.

What Do I Need to Do Now?

Corporation tax is now in full swing in Dubai. Most businesses operating on a calendar year basis will need to file their corporation tax returns nine months after their financial year-end.

If you're operating in Dubai, whether as a company or freelancer, here are the 5 steps you need to take:

1. Register for corporation tax
   
   
2. Implement proper accounting measures that comply with International Financial Reporting Standards
   
   
3. Consider investing in accounting software to keep records up to date
   
   
4. File corporation tax returns annually (due nine months after your financial year-end)
   
   
5. If applying for free zone exemption, get your financial statements audited annually

How Can I Get Help?

With proper planning and compliance, you can still achieve 0% corporation tax in Dubai, but you need the right structure and advice to get there.

Need help with Dubai tax planning? Capture Accounting specialises in helping UK social media influencers and content creators set up and maintain compliance in Dubai. Get in touch for a consultation to discuss your specific situation.

FAQs about Dubai Corporation Tax Laws

To learn more about the corporation tax changes, check out our frequently asked questions below or contact us today:

How do I find out what my financial year is for tax?

To determine the financial year for a Dubai company, refer to the Memorandum and Articles of Association (MOA) or the company's incorporation documents. It's important to note that the financial year for a company in Dubai can vary, and it is not necessarily aligned with the calendar year (January to December).

Additionally, you can check with the Dubai Department of Economic Development (DED) or the Dubai Multi Commodities Centre (DMCC) if your company is registered with them.

Is the tax different for different Emirates?

No, this is a federal-level taxation regime; therefore, all Emirates will be subject to the same regulatory measures.

Will there be withholding tax for operating outside of UAE?

The rate for withholding tax has been set at 0%, and there is no requirement to file a return with the Ministry.

To learn more about taxation in Dubai, read our blogs here:

• Tax and VAT rules for influencers in Dubai
  
  
• Setting up a business in Dubai