UAE Corporate Tax Reliefs, Exemptions & Incentives – Glossary

UAE Corporate Tax

UAE Corporate Tax is a federal tax levied on business profits at a standard rate of 9% on taxable income exceeding AED 375,000. It applies to juridical persons and certain individuals conducting business activities in the UAE, subject to exemptions and reliefs.

Taxable Person

A Taxable Person refers to any juridical entity or individual required to register and comply with UAE Corporate Tax regulations. This includes UAE mainland companies, free zone entities that do not qualify for exemptions, and foreign entities with a permanent establishment in the UAE.

Exempt Person

An Exempt Person is an entity that is legally excluded from UAE Corporate Tax under specific provisions. These include government entities, government-controlled entities, qualifying public benefit entities, and certain investment funds, provided they meet the conditions prescribed by the Federal Tax Authority.

Small Business Relief

Small Business Relief allows eligible businesses with revenue below AED 3 million to be treated as having no taxable income for a specified period. This relief reduces compliance burdens and tax liability, supporting startups and small enterprises during the initial stages of growth.

Qualifying Free Zone Person

A Qualifying Free Zone Person is a free zone entity that meets substance, income, and compliance requirements under UAE Corporate Tax law. Such entities may benefit from a 0% corporate tax rate on qualifying income while remaining subject to tax on non-qualifying income.

Qualifying Income

Qualifying Income refers to income earned by a Qualifying Free Zone Person from approved activities, such as transactions with foreign persons or other free zone entities. This income may be taxed at 0%, provided all regulatory conditions and substance requirements are met.

Non-Qualifying Income

Non-Qualifying Income is income earned by free zone entities that does not meet the criteria for tax incentives. This income is subject to the standard UAE Corporate Tax rate of 9%, even if the entity otherwise qualifies as a Free Zone Person.

Permanent Establishment

A Permanent Establishment (PE) is a fixed place of business through which a foreign company conducts business in the UAE. The existence of a PE triggers corporate tax obligations on income attributable to UAE operations under international tax principles and UAE tax law.

Economic Substance Regulations (ESR)

Economic Substance Regulations require certain UAE entities to demonstrate adequate economic activity in the UAE. While ESR is separate from Corporate Tax, compliance supports free zone benefits and tax incentives by proving real business operations and preventing artificial profit shifting.

Tax Group

A Tax Group allows multiple UAE entities under common ownership to be treated as a single taxable person. This enables consolidation of profits and losses, simplifies compliance, and may result in overall tax efficiency, subject to Federal Tax Authority approval and conditions.

Loss Carry Forward

Loss Carry Forward allows businesses to offset future taxable profits with prior-year losses, subject to ownership and continuity conditions. This relief helps businesses manage cash flow and reduces tax burdens during recovery or restructuring periods.

Transfer Pricing

Transfer Pricing refers to pricing of transactions between related parties. UAE Corporate Tax law requires such transactions to follow the arm’s length principle, ensuring fair market pricing and preventing profit shifting for tax avoidance purposes.

Arm’s Length Principle

The Arm’s Length Principle requires related-party transactions to be priced as if conducted between independent parties. Compliance ensures transparency, aligns with OECD standards, and is critical for avoiding penalties under UAE Corporate Tax transfer pricing rules.

Related Party

A Related Party includes individuals or entities with ownership, control, or significant influence over another entity. Transactions with related parties must comply with transfer pricing rules and be documented to support tax compliance in the UAE.

Withholding Tax

Withholding Tax under UAE Corporate Tax is currently set at 0% on certain UAE-sourced income paid to non-residents. While no tax is deducted, reporting obligations still apply, supporting transparency and international tax compliance.

Participation Exemption

Participation Exemption allows qualifying dividends and capital gains from shareholdings in subsidiaries to be exempt from UAE Corporate Tax. This promotes holding company structures and prevents double taxation on profits already taxed at the subsidiary level.

Capital Gains Exemption

Capital Gains Exemption applies to gains from the sale of qualifying shares or ownership interests. When conditions are met, these gains are excluded from taxable income, supporting investment activity and long-term business restructuring strategies.

Foreign Tax Credit

Foreign Tax Credit allows UAE businesses to offset corporate tax paid in foreign jurisdictions against UAE Corporate Tax liabilities. This prevents double taxation and is subject to limits based on the UAE tax payable on the same income.

Business Restructuring Relief

Business Restructuring Relief provides tax neutrality for qualifying mergers, spin-offs, and reorganizations. Assets and liabilities can be transferred without triggering immediate tax liabilities, supporting corporate restructuring and business continuity.

Accrual Basis of Accounting

Accrual Accounting requires income and expenses to be recorded when earned or incurred, not when cash is received or paid. UAE Corporate Tax generally mandates the accrual basis, ensuring accurate profit measurement and tax reporting.

Cash Basis Accounting

Cash Basis Accounting allows income and expenses to be recorded only when cash changes hands. Certain small businesses may be permitted to use this method, subject to Federal Tax Authority approval, simplifying compliance for eligible taxpayers.

Tax Period

A Tax Period is the financial year for which corporate tax is calculated and reported. It typically aligns with the company’s accounting period and determines deadlines for filing tax returns and making payments.

Corporate Tax Return

A Corporate Tax Return is the official declaration of taxable income submitted to the Federal Tax Authority. It must be filed annually within the prescribed timeframe, along with supporting schedules and disclosures.

Federal Tax Authority (FTA)

The Federal Tax Authority is the UAE government body responsible for administering, collecting, and enforcing corporate tax laws. It issues guidance, accepts filings, conducts audits, and imposes penalties for non-compliance.

Tax Registration

Tax Registration is the mandatory process of enrolling with the Federal Tax Authority for corporate tax purposes. All taxable persons must obtain a Tax Registration Number (TRN) to comply with filing and payment obligations.

Tax Deregistration

Tax Deregistration is the process of canceling a corporate tax registration when a business ceases operations or no longer qualifies as a taxable person. Formal approval from the FTA is required to avoid future penalties.

Tax Audit

A Tax Audit is a review conducted by the Federal Tax Authority to verify compliance with UAE Corporate Tax laws. Businesses must maintain proper records and documentation to support reported figures and relief claims.

Penalties and Fines

Penalties and fines are imposed for non-compliance with corporate tax regulations, including late registration, late filing, incorrect returns, or failure to maintain records. Timely compliance helps avoid financial and reputational risks.

Record Keeping

Record Keeping requires businesses to maintain financial statements, invoices, contracts, and tax records for at least seven years. Proper documentation supports tax filings, audits, and eligibility for exemptions and reliefs.

Substance Requirements

Substance Requirements ensure that businesses claiming tax benefits have real operations, employees, and decision-making activities in the UAE. These requirements support transparency and prevent misuse of tax incentives.

Government Entity Exemption

Government Entity Exemption applies to UAE federal and local government bodies performing sovereign activities. These entities are excluded from corporate tax, reflecting their public service role rather than profit-driven operations.

Government-Controlled Entity

A Government-Controlled Entity may qualify for corporate tax exemption if it is wholly owned and controlled by the government and conducts qualifying activities. Approval from the Ministry of Finance is typically required.

Public Benefit Entity

A Public Benefit Entity is a non-profit organization engaged in charitable, educational, or social activities. Once approved, such entities are exempt from UAE Corporate Tax, supporting public welfare initiatives.

Investment Fund Exemption

Investment Fund Exemption applies to qualifying investment funds that meet regulatory and ownership conditions. This exemption promotes asset management and investment activities in the UAE financial ecosystem.

Real Estate Investment Relief

Real Estate Investment Relief allows certain real estate investment structures to manage tax exposure efficiently. Specific income streams may be excluded or taxed differently, depending on ownership and operational structure.

Free Zone Tax Incentives

Free Zone Tax Incentives offer eligible businesses reduced or zero corporate tax on qualifying income. These incentives aim to attract foreign investment and promote economic diversification across UAE free zones.

Mainland Company

A Mainland Company is licensed by a UAE economic department and generally subject to standard corporate tax rates. However, reliefs and exemptions may apply depending on business size, income, and activities.

Branch Office Taxation

Branch Office Taxation applies to foreign companies operating through UAE branches. Income attributable to the branch is subject to UAE Corporate Tax, unless protected by exemptions or double tax treaties.

Double Taxation Avoidance Agreement (DTAA)

A DTAA is an international treaty that prevents the same income from being taxed in two jurisdictions. UAE businesses benefit from treaty relief through reduced withholding taxes and foreign tax credits.

Tax Residency Certificate

A Tax Residency Certificate confirms that an entity or individual is a UAE tax resident. It is commonly used to claim benefits under double taxation treaties and reduce international tax exposure.

Controlled Foreign Company (CFC)

CFC rules target income parked in low-tax jurisdictions. While UAE Corporate Tax currently has no formal CFC regime, anti-avoidance provisions may apply to aggressive tax planning structures.

Anti-Avoidance Rules

Anti-Avoidance Rules empower the Federal Tax Authority to disregard artificial transactions designed to reduce tax liability. These rules ensure that tax reliefs and exemptions are used only for legitimate commercial purposes.

General Anti-Abuse Rule (GAAR)

GAAR allows tax authorities to recharacterize transactions lacking economic substance. It safeguards the integrity of the UAE Corporate Tax system by preventing misuse of incentives and relief provisions.

Deductible Expenses

Deductible Expenses are costs incurred wholly and exclusively for business purposes. These expenses reduce taxable income, provided they are properly documented and not specifically disallowed under corporate tax law.

Non-Deductible Expenses

Non-Deductible Expenses include fines, penalties, and certain entertainment costs. These expenses cannot be deducted from taxable income, ensuring accurate profit calculation for tax purposes.

Interest Deduction Limitation

Interest Deduction Limitation restricts the amount of net interest expense deductible for tax purposes. This rule prevents excessive debt financing and aligns UAE tax policy with international standards.

Net Interest Expense

Net Interest Expense refers to interest costs minus interest income. Deductibility is subject to prescribed limits under UAE Corporate Tax law to prevent erosion of the tax base.

Tax Loss Utilization

Tax Loss Utilization allows businesses to offset current profits with accumulated losses. This relief supports business continuity and mitigates tax impact during economic downturns or recovery phases.

Ownership Continuity Test

The Ownership Continuity Test ensures that tax losses are not traded through ownership changes. Businesses must maintain a minimum level of ownership continuity to utilize carried-forward losses.

Business Purpose Test

The Business Purpose Test requires transactions to have genuine commercial intent. It supports the application of reliefs and exemptions only where real economic activity exists.

Compliance Burden Reduction

Compliance Burden Reduction measures include simplified filing, small business relief, and exemptions. These measures aim to ease administrative obligations for businesses while maintaining tax transparency.

Tax Planning

Tax Planning involves structuring business operations efficiently within legal boundaries to minimize tax liability. Proper planning ensures compliance while leveraging available UAE corporate tax reliefs and incentives.

Tax Advisory Services

Tax Advisory Services provide expert guidance on UAE Corporate Tax registration, compliance, exemptions, and reliefs. Professional advice helps businesses navigate complex regulations and avoid penalties.

Tax Compliance Services

Tax Compliance Services include registration, return filing, documentation, and audit support. These services ensure businesses meet all UAE Corporate Tax obligations accurately and on time.

Corporate Tax Advisory

Corporate Tax Advisory focuses on strategic planning, restructuring, and optimization of tax positions. It helps businesses maximize reliefs while maintaining compliance with UAE tax laws.

Financial Statements

Financial Statements include balance sheets, income statements, and cash flow reports. They form the basis for corporate tax calculations and must comply with recognized accounting standards.

IFRS Compliance

IFRS Compliance ensures financial statements align with International Financial Reporting Standards. UAE Corporate Tax relies on IFRS-based accounting to ensure consistency and transparency in taxable income calculation.

Adjusted Taxable Income

Adjusted Taxable Income is accounting profit modified for tax adjustments, including disallowed expenses and exemptions. It forms the basis for calculating corporate tax liability.

Tax Incentive Framework

The Tax Incentive Framework outlines exemptions, reliefs, and reduced rates under UAE Corporate Tax law. It supports investment, innovation, and economic growth.

Foreign Permanent Establishment Exemption

Foreign Permanent Establishment Exemption allows UAE companies to exclude income earned through foreign branches, subject to conditions. This prevents double taxation on overseas operations.

Head Office Allocation

Head Office Allocation refers to the allocation of costs and income between head office and branches. Proper allocation ensures accurate tax reporting and compliance.

Tax Neutrality

Tax Neutrality ensures that business decisions are not distorted by tax considerations. UAE Corporate Tax aims to maintain neutrality while offering targeted reliefs.

Corporate Governance

Corporate Governance refers to systems and controls guiding business operations. Strong governance supports tax compliance, transparency, and eligibility for reliefs.

Compliance Risk

Compliance Risk arises from failure to meet tax obligations. Effective systems and professional support reduce exposure to audits, penalties, and reputational damage.

Advance Ruling

An Advance Ruling is official clarification from the FTA on tax treatment of specific transactions. It provides certainty and reduces future compliance risks.

Tax Assessment

A Tax Assessment is the FTA’s determination of tax payable. Businesses may challenge assessments through formal objection and appeal procedures.

Voluntary Disclosure

Voluntary Disclosure allows businesses to correct errors in tax returns proactively. Early disclosure reduces penalties and demonstrates good compliance behavior.

Late Filing Penalty

Late Filing Penalty applies when corporate tax returns are submitted after the deadline. Timely compliance avoids unnecessary financial costs.

Late Payment Penalty

Late Payment Penalty is charged when corporate tax liabilities are not paid on time. Businesses should manage cash flow to meet tax obligations.

Tax Compliance Calendar

A Tax Compliance Calendar outlines key deadlines for registration, filing, and payment. It helps businesses stay organized and compliant.

Audit Readiness

Audit Readiness involves maintaining proper records and controls. Being audit-ready reduces stress and ensures smooth interactions with tax authorities.

Tax Optimization

Tax Optimization focuses on legally minimizing tax exposure through exemptions and reliefs. It requires careful planning and compliance with UAE tax laws.

Business Expansion Relief

Business Expansion Relief supports companies investing in growth and restructuring. Tax-neutral transfers and loss utilization facilitate expansion strategies.

Start-up Incentives

Start-up Incentives include small business relief and simplified compliance. These incentives encourage entrepreneurship and innovation in the UAE.

Foreign Investor Incentives

Foreign Investor Incentives include free zone benefits, tax exemptions, and treaty access. These incentives attract global businesses to the UAE.

Economic Diversification Incentives

Economic Diversification Incentives promote non-oil sectors. Corporate tax reliefs support industries such as technology, logistics, and financial services.

Tax Transparency

Tax Transparency ensures accurate reporting and disclosure. UAE Corporate Tax promotes transparency to align with international standards.

OECD Alignment

OECD Alignment reflects UAE’s commitment to global tax standards. Corporate tax rules align with BEPS principles and international best practices.

BEPS Framework

The BEPS Framework addresses base erosion and profit shifting. UAE Corporate Tax incorporates BEPS principles to prevent tax avoidance.

International Tax Compliance

International Tax Compliance ensures businesses meet both UAE and global tax obligations. Treaty benefits and foreign tax credits support compliance.

Multinational Enterprise (MNE)

An MNE operates across multiple jurisdictions. UAE Corporate Tax rules apply to MNEs with UAE presence, including transfer pricing compliance.

Country-by-Country Reporting

Country-by-Country Reporting applies to large MNEs. It enhances transparency on global income allocation and tax payments.

Compliance Framework

A Compliance Framework includes policies, systems, and controls. It ensures ongoing adherence to corporate tax requirements.

Tax Risk Management

Tax Risk Management identifies and mitigates tax risks. It supports sustainable compliance and strategic decision-making.

Corporate Structuring

Corporate Structuring involves designing legal and operational structures. Effective structuring maximizes tax efficiency within legal boundaries.

Holding Company Regime

Holding Company Regime benefits from participation exemptions. It supports investment and group structuring in the UAE.

Group Relief

Group Relief allows loss offset within a tax group. It enhances cash flow and tax efficiency for corporate groups.

Intercompany Transactions

Intercompany Transactions occur between related entities. Proper pricing and documentation are essential for compliance.

Documentation Requirements

Documentation Requirements include transfer pricing files and financial records. Proper documentation supports audit defense.

Tax Policy

Tax Policy outlines a company’s approach to tax compliance. It supports governance and transparency.

Compliance Strategy

A Compliance Strategy ensures timely filings and payments. It reduces penalties and audit risks.

Advisory Engagement

An Advisory Engagement involves professional tax support. It ensures accurate interpretation of tax laws.

Tax Efficiency

Tax Efficiency refers to minimizing tax costs legally. Reliefs and exemptions support efficiency.

Compliance Monitoring

Compliance Monitoring tracks ongoing obligations. It ensures continuous adherence to tax laws.

Regulatory Updates

Regulatory Updates include changes to tax laws. Staying updated ensures continued compliance.

Tax Technology

Tax Technology automates compliance processes. It improves accuracy and efficiency.

Digital Tax Filing

Digital Tax Filing enables online submission of returns. It streamlines compliance.

Professional Representation

Professional Representation supports businesses during audits and disputes. It protects taxpayer rights.

Corporate Tax Compliance

Corporate Tax Compliance involves fulfilling all UAE tax obligations. It ensures legal certainty and business sustainability.