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Federal corporate tax on business profits in the United Arab Emirates (UAE) will be applicable to:
UAE companies and other legal persons incorporated in UAE.
Legal persons incorporated in foreign jurisdictions but effectively managed and controlled in the UAE.
Natural persons engaged in a business or commercial activity in the UAE under a commercial license including a freelance license or permit would also be subject to corporate tax.
Foreign legal entity
Which has a permanent establishment in the UAE, and
Earns UAE-sourced income.
Limited liability partnerships, partnerships limited by shares, and other types of partnerships, where no partners have unlimited liability for the obligations of the partnership.
Any business activity directly carried out by the Government under a trade license will be covered within the scope of the UAE CT regime.
Exempt Incomes
As per the law, all incomes generated by individuals except income from commercial activities will be outside the ambit of corporate tax. Therefore, income earned by individuals from a business under a commercial license including a freelance permit or license will be subject to corporate tax.
Exempted Incomes from Corporate Tax:
Income earned from employment and other personal income earned by individuals such as dividends, rental receipts, royalties, and other investment returns.
Interest income earned by individuals from bank deposits or any other saving schemes.
Income from dividends and capital gains earned by companies in UAE from the sale of shares of a subsidiary company.
Income from dividends and capital gains earned from the sale of shares of both UAE companies and foreign companies.
Income earned by UAE companies from operations conducted through foreign subsidiaries or foreign branches outside the UAE.
Income of a non-resident earned from operating or leasing aircraft or ships (and associated equipment) used in international transportation under the reciprocity arrangement with other countries.
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