Corporate Tax & Transfer Pricing Services in the UAE
Strategic Tax Solutions for Compliance & Growth in the UAE
Understanding Corporate Tax in the UAE
Corporate Tax in the UAE was introduced under Federal Decree-Law No. 47 of 2022, effective from June 1, 2023. This marks a significant shift in the country’s tax landscape, requiring businesses to reassess their financial structures and compliance strategies. Corporate Tax applies to both juridical and natural persons engaged in business activities within the UAE. Every taxable entity must register with the Federal Tax Authority (FTA) and fulfill annual tax filing obligations.
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Corporate Tax Rates
- The standard corporate tax rate in the UAE is 9%.
- A 0% tax rate applies to taxable income up to AED 375,000 to support small and medium-sized enterprises (SMEs).
- Qualifying Free Zone Persons benefit from a 0% tax rate on qualifying income, provided they meet the conditions set by the Federal Tax Authority (FTA).
Compliance Requirements
- Businesses must maintain financial records in accordance with International Financial Reporting Standards (IFRS).
- Corporate Tax returns must be submitted within nine months from the end of the financial year.
- Companies earning revenue above AED 50 million are required to submit audited financial statements, reinforcing the importance of accurate financial reporting.
Impact on Business Operations
- Businesses should carefully assess the impact of Corporate Tax on their existing structures, transactions, and profit distributions.
- Transactions involving related parties and connected persons must adhere to the arm’s length principle, ensuring transactions are conducted at fair market value.
Key Features of Corporate Tax and Transfer Pricing
Corporate Tax compliance goes beyond just registration and return filing. Businesses must:
- Assess their financial position
- Maintain proper documentation
- Implement tax-efficient strategies
Why Transfer Pricing Matters?
- Transfer Pricing governs the pricing of transactions between related entities.
- Helps businesses comply with tax regulations, reducing risks of penalties.
- Enhances financial transparency and fair allocation of income across jurisdictions.
Transfer Pricing Compliance Under UAE Corporate Tax Law
To comply with UAE Corporate Tax Law, businesses must maintain:
- Arm’s Length Principle – Transactions between related parties must be priced as if they were conducted between independent entities.
- Transfer Pricing Documentation – Businesses must maintain and submit a Local File, Master File, and Disclosure Form as required.
- Economic Substance & Reporting – Entities must justify their pricing policies with proper benchmarking and functional analysis to comply with UAE tax regulations.
Who Needs to Submit Transfer Pricing Documentation?
- TP disclosure form: Disclosure of connected person payments and related party transactions along with CT Return filing within 9 months from the end of the period in a manner prescribed by FTA.
- Local file and master file: The businesses exceeding standalone revenue AED 200 Mil or a member of CBCR compliant MNE group must submit the documents within 30 days upon request by the FTA.
The Arm’s Length Principle
- Ensures transactions between related parties are conducted at fair market value
- Prevents tax avoidance and aligns with global tax standards
- Strengthens compliance and promotes fair taxation across UAE businesses Added one more point
- The UAE follows OECD Transfer Pricing Guidelines, mandating proper documentation and justification of intercompany transactions.
Our Corporate Tax & Transfer Pricing Services
UAE Transfer Pricing Regulations
Under UAE Corporate Tax Law, Transfer Pricing regulations ensure that related-party transactions reflect fair market pricing. Key legal provisions include:
- Article 34 – Arm’s Length Principle – (Transactions must follow market rates)
- Article 35 – Related Parties & Controls – (Defines related party transactions)
- Article 36 – Payments to Connected Persons – (Ensures deductions meet TP standards)
- Article 55 – TP Documentation –(Mandates Local File, Master File, and Disclosure Form for eligible businesses)
How Spectrum Auditing Can Help You with CT & TP Compliance
With years of expertise in UAE taxation and regulatory compliance, Spectrum Auditing offers end-to-end Corporate Tax and Transfer Pricing solutions. Our structured approach includes:
- Tax Planning & Compliance Advisory: – Helping businesses optimize tax liabilities while ensuring full compliance.
- Financial & Intercompany Transaction Reviews – Ensuring transparent reporting & regulatory alignment.
- Transfer Pricing Documentation & Audit Support – Preventing compliance risks with robust documentation & policy structuring.
- Customized Solutions for SMEs & Large Enterprises – Tailored strategies to meet business-specific tax obligations.
Frequently Asked Questions (FAQs)
Does the UAE impose corporate tax?
The UAE did not have a federal corporate income tax for general businesses until May 31, 2023. However, taxes were applicable to foreign banks and oil companies. Corporate tax applies to general businesses for financial years commencing on or after June 1, 2023.
What is the corporate tax rate for oil and gas companies in the UAE?
Oil and gas companies in the UAE are taxed at rates stipulated in the respective concessions agreements, which could be as high as 55% on their UAE-sourced profits.
Are there any plans to introduce corporate tax in the UAE?
Corporate tax has been introduced in UAE on business profits exceeding AED 375,000/- from financial years commencing from June 01, 2023.
Does the UAE have double tax treaties with other countries?
Yes, the UAE has entered into double tax treaties with numerous countries to prevent double taxation of income earned in any of the two countries.
What other taxes are corporations in the UAE subject to?
A natural person shall be subject to UAE Corporate Tax if they derive an annual Turnover exceeding AED 1 million from a ‘Business’ or ‘Business Activity’ in the UAE, as defined by the Corporate Tax Law and Cabinet Decision No. 49 of 2023.
Will natural persons be subject to UAE Corporate Tax?
As of September 2021, businesses in the UAE were subject to Value Added Tax (VAT) at a standard rate of 5%. There were also excise taxes on certain products like tobacco and carbonated drinks.
Will donations made to charities be deductible?
Yes, if the donation is made to a charity that is listed in Cabinet Decision No. 37 of 2023 or any subsequent relevant decisions as a Qualifying Public Benefit Entity.
How can I elect for Small Business Relief?
Eligible Taxable Persons will be able to elect for Small Business Relief in their Corporate Tax Return.
Will a group of UAE companies be able to form a Tax Group for UAE Corporate UAE
resident companies can apply to form a Tax Group and be treated as a single Taxable Person if the UAE parent company (directly or indirectly) holds at least 95% of the share capital and voting rights of each of the companies, and meet all other relevant conditions.
Is there a difference between a Designated Zone and a Free Zone?
A Designated Zone is a Free Zone that is recognized as a Designated Zone for UAE VAT purposes. Qualifying Free Zone Persons can benefit from the 0% Corporate Tax rate on income derived from the wholesale distribution of goods or materials (i.e., not to the end consumer) from a Designated Zone to domestic and foreign businesses.
Are Qualifying Free Zone Persons required to comply with transfer pricing rules?
Yes. Qualifying Free Zone Persons must transact with their Related Parties and Connected Persons in the UAE and abroad on arm’s length terms and maintain appropriate transfer pricing and other supporting documentation. This requirement applies irrespective of whether the Related Party or Connected Person also benefits from the Free Zone Corporate Tax regime, is subject to the standard UAE Corporate Tax regime or is subject to the tax regime of a foreign country.
What is the corporate tax rate for foreign banks in the UAE?
As per the rules applicable, foreign banks operating in the UAE are subjected to a 20% corporate tax on their profits.
Can a corporate tax agency in the UAE help with tax planning and compliance?
Yes, tax agencies in the UAE offer services related to tax planning and compliance. They can provide advice on minimizing tax liabilities and ensure that your business complies with all relevant tax regulations. You can reach out at [email protected] for any help in tax planning & compliance for corporate tax.
Is there a tax on corporate dividends in the UAE?
We can answer to this question two segments:
- Dividend received by companies – Dividend received by companies are exempt income, as tax on profits of the same are paid by the company distributing dividend.
- Dividend received by individuals – Corporate tax is not applicable to individuals hence dividend received by them is not taxable.
What is the purpose of double tax treaties?
The main purpose of these treaties is to promote and facilitate trade and investment between the two countries. They do this by preventing double taxation, where an individual or corporation would be taxed in both countries on the same income.
Does the UAE have a tax treaty with the United States?
The UAE and the United States does not have a tax treaty.
Do UAE Corporate Tax replace VAT in the UAE?
No, Corporate Tax and VAT are two different types of taxes. Both will apply in the UAE
How long must I keep my records for UAE Corporate Tax purposes?
Records and documents should be kept for 7 years following the end of the relevant Tax Period.
Can I use the consolidated financial statements of the group to prepare the UAE Corporate Tax Return for my UAE business?
No, unless the group only comprises UAE resident entities that have applied to form a Tax Group and the relevant adjustments are made. Otherwise, each UAE entity that is subject to Corporate Tax will need to prepare and maintain stand-alone financial statements for UAE Corporate Tax purposes.
Who is required to prepare and maintain audited financial statements?
The following Persons are required to prepare and maintain audited financial statements:
- A Taxable Person that derives Revenue exceeding AED 50 million during the relevant Tax Period.
- A Qualifying Free Zone Person.
What is the purpose of double tax treaties?
The primary purpose of these treaties is to promote and facilitate trade and investment between two countries. They prevent double taxation, ensuring that individuals and corporations are not taxed twice on the same income.
Does the UAE have double tax treaties with other countries?
Yes, the UAE has entered into double tax treaties with numerous countries to prevent double taxation of income earned in either jurisdiction.