UAE Corporate Tax Core Terminology Glossary

UAE Corporate Tax

UAE Corporate Tax is a federal tax imposed on the net profits of businesses operating in the UAE. Introduced under Federal Decree-Law No. 47 of 2022, it applies generally at 9% on taxable income exceeding AED 375,000, ensuring transparency and international tax alignment.

Taxable Person

A Taxable Person refers to any juridical or natural person subject to UAE Corporate Tax. This includes UAE companies, foreign entities with a UAE presence, and individuals conducting business activities. Taxable Persons must register, file returns, and comply with all corporate tax obligations.

Taxable Income

Taxable Income is the accounting net profit or loss of a business, adjusted for allowable deductions, exemptions, and disallowed expenses under UAE Corporate Tax law. It forms the basis on which corporate tax is calculated after applying relevant reliefs and thresholds.

Federal Tax Authority (FTA)

The Federal Tax Authority is the UAE government body responsible for administering, collecting, and enforcing federal taxes, including Corporate Tax. The FTA oversees registration, return filing, audits, penalties, and ensures compliance with UAE tax legislation.

Corporate Tax Registration

Corporate Tax Registration is the mandatory process whereby a Taxable Person enrolls with the FTA to obtain a Corporate Tax Registration Number. Registration must be completed within prescribed timelines to avoid administrative penalties.

Corporate Tax Return

A Corporate Tax Return is an official declaration submitted annually to the FTA detailing taxable income, exemptions, reliefs, and tax payable. It must be filed within nine months from the end of the relevant tax period.

Tax Period

A Tax Period refers to the financial year for which Corporate Tax is assessed. Typically, it aligns with the Gregorian calendar year or the taxpayer’s approved financial year used for accounting and reporting purposes.

Accounting Income

Accounting Income is the net profit or loss reported in financial statements prepared in accordance with internationally accepted accounting standards. This figure is adjusted under UAE Corporate Tax law to determine taxable income.

Qualifying Free Zone Person

A Qualifying Free Zone Person is a Free Zone entity that meets specific conditions, including maintaining adequate substance and earning qualifying income, enabling it to benefit from a 0% Corporate Tax rate on qualifying activities.

Free Zone

A Free Zone is a designated economic area in the UAE offering regulatory and tax incentives. While Free Zone entities are subject to Corporate Tax, eligible businesses may continue to benefit from a 0% rate on qualifying income.

Qualifying Income

Qualifying Income refers to income earned by a Free Zone Person from approved activities that meet the conditions set by UAE Corporate Tax law, allowing such income to be taxed at 0%.

Non-Qualifying Income

Non-Qualifying Income is income earned by a Free Zone entity that does not meet qualifying criteria. Such income is subject to the standard 9% Corporate Tax rate.

Permanent Establishment (PE)

A Permanent Establishment is a fixed place of business through which a foreign entity conducts business in the UAE. This includes branches, offices, or dependent agents and triggers Corporate Tax obligations in the UAE.

Foreign Juridical Person

A Foreign Juridical Person is a legal entity incorporated outside the UAE that may be subject to UAE Corporate Tax if it has a Permanent Establishment or earns UAE-sourced income.

UAE-Sourced Income

UAE-Sourced Income refers to income derived from activities, assets, or services connected to the UAE. Such income may be taxable even if earned by non-resident entities.

Small Business Relief

Small Business Relief allows eligible businesses with revenue below AED 3 million to be treated as having no taxable income, subject to conditions, thereby reducing compliance and tax burdens.

Tax Exempt Person

A Tax Exempt Person is an entity excluded from Corporate Tax, such as government entities, qualifying public benefit organizations, and certain pension or investment funds, provided legal conditions are met.

Government Entity

A Government Entity includes federal or local UAE government bodies that are exempt from Corporate Tax due to their public functions and statutory status.

Public Benefit Entity

A Public Benefit Entity is a non-profit organization approved by the UAE authorities that operates for charitable or social purposes and qualifies for Corporate Tax exemption.

Investment Fund

An Investment Fund may qualify for Corporate Tax exemption if it meets regulatory requirements, investor protection rules, and operates under recognized fund management structures.

Tax Group

A Tax Group allows multiple UAE resident companies under common ownership to be treated as a single taxable person, enabling consolidated tax filing and intra-group relief.

Parent Company

A Parent Company is an entity that holds controlling ownership in one or more subsidiaries, potentially enabling formation of a Tax Group under UAE Corporate Tax law.

Subsidiary

A Subsidiary is a company controlled by another entity, typically through majority ownership. Subsidiaries may join a Tax Group if eligibility conditions are met.

Transfer Pricing

Transfer Pricing refers to pricing arrangements for transactions between related parties. UAE Corporate Tax law requires such transactions to follow the arm’s length principle.

Arm’s Length Principle

The Arm’s Length Principle mandates that related-party transactions be priced as if conducted between independent parties under similar market conditions.

Related Parties

Related Parties are individuals or entities with ownership, control, or influence relationships that may affect transaction pricing and require disclosure under Corporate Tax regulations.

Connected Persons

Connected Persons include owners, directors, and related individuals whose transactions with the business may be subject to special tax treatment and deductibility limitations.

Transfer Pricing Documentation

Transfer Pricing Documentation includes master files, local files, and supporting analyses required to demonstrate compliance with the arm’s length principle.

Deductible Expenses

Deductible Expenses are costs incurred wholly and exclusively for business purposes that may be deducted from taxable income, subject to UAE Corporate Tax limitations.

Non-Deductible Expenses

Non-Deductible Expenses include penalties, fines, and certain entertainment costs that cannot be deducted when calculating taxable income.

Interest Deduction Limitation

This rule restricts the deductibility of net interest expenses to a specified percentage of EBITDA, preventing excessive debt-based tax erosion.

EBITDA

EBITDA stands for Earnings Before Interest, Tax, Depreciation, and Amortization and is used to calculate interest deduction limits under Corporate Tax law.

Loss Carry Forward

Loss Carry Forward allows businesses to offset future taxable profits with prior period tax losses, subject to ownership continuity and other conditions.

Tax Loss

A Tax Loss arises when deductible expenses exceed taxable income in a tax period and may be carried forward or transferred within a Tax Group.

Loss Utilization

Loss Utilization refers to the application of carried-forward tax losses to reduce taxable income in subsequent periods.

Tax Credit

A Tax Credit is a reduction in tax payable, often arising from foreign taxes paid on income that is also taxable in the UAE.

Withholding Tax

Withholding Tax is a tax deducted at source on certain payments to non-residents. Currently, the UAE applies a 0% withholding tax rate.

Double Taxation

Double Taxation occurs when the same income is taxed in more than one jurisdiction, often mitigated through tax treaties or foreign tax credits.

Double Taxation Avoidance Agreement (DTAA)

A DTAA is a treaty between countries to prevent double taxation and allocate taxing rights on cross-border income.

Economic Substance

Economic Substance refers to having real business activities, employees, and assets in the UAE, supporting compliance with tax and regulatory requirements.

Substance Requirements

Substance Requirements mandate that businesses demonstrate genuine operational presence in the UAE, especially for Free Zone and exempt entities.

Tax Residency

Tax Residency determines whether an entity is considered a UAE resident for Corporate Tax purposes based on incorporation, management, or control.

Resident Person

A Resident Person is an entity or individual considered resident in the UAE and subject to Corporate Tax on worldwide income.

Non-Resident Person

A Non-Resident Person is subject to UAE Corporate Tax only on income attributable to a Permanent Establishment or UAE-sourced income.

Business Activity

A Business Activity includes any trade, profession, or commercial activity conducted for profit and falls within the scope of Corporate Tax.

Natural Person

A Natural Person is an individual conducting a business or professional activity in the UAE and may be subject to Corporate Tax if thresholds are exceeded.

Juridical Person

A Juridical Person is a legal entity such as a company or partnership recognized under law and subject to Corporate Tax obligations.

Compliance Obligations

Compliance Obligations include registration, record-keeping, filing returns, and timely tax payments under UAE Corporate Tax law.

Record Keeping

Record Keeping requires businesses to maintain financial and tax records for at least seven years to support Corporate Tax filings and audits.

Tax Audit

A Tax Audit is an examination conducted by the FTA to verify the accuracy of tax returns and compliance with Corporate Tax regulations.

Voluntary Disclosure

Voluntary Disclosure allows taxpayers to correct errors or omissions in filed returns, reducing potential penalties if submitted within allowed timelines.

Administrative Penalties

Administrative Penalties are fines imposed for non-compliance, such as late registration, filing, or payment of Corporate Tax.

Tax Assessment

A Tax Assessment is an official determination by the FTA of a taxpayer’s Corporate Tax liability based on filed information or audit findings.

Tax Payable

Tax Payable is the final amount of Corporate Tax due after applying rates, exemptions, losses, and credits.

Payment Deadline

The Payment Deadline is the final date by which Corporate Tax must be paid to the FTA, generally aligned with the return filing deadline.

Tax Deregistration

Tax Deregistration is the formal process of canceling Corporate Tax registration when a business ceases operations or no longer meets taxable criteria.

Business Restructuring Relief

This relief allows tax-neutral transfers of assets or liabilities during qualifying restructurings, subject to continuity and commercial purpose conditions.

Qualifying Business Transfer

A Qualifying Business Transfer enables assets or entire businesses to be transferred without immediate tax consequences under specific conditions.

Market Value

Market Value refers to the price that would be agreed upon between independent parties and is used for transfer pricing and asset valuation.

Unrealized Gains

Unrealized Gains are increases in asset value not yet realized through sale and are generally excluded from taxable income unless specified.

Realized Gains

Realized Gains arise from the sale or disposal of assets and may be subject to Corporate Tax depending on classification and exemptions.

Capital Assets

Capital Assets are long-term assets such as property or equipment used in business operations and subject to depreciation rules.

Depreciation

Depreciation allocates the cost of tangible assets over their useful life and is deductible under Corporate Tax rules.

Amortization

Amortization spreads the cost of intangible assets, such as software or licenses, over their useful life for tax purposes.

Intangible Assets

Intangible Assets include intellectual property, trademarks, and goodwill, which may have tax implications upon transfer or disposal.

Goodwill

Goodwill represents the excess value of a business over its net identifiable assets and may be recognized during acquisitions.

Anti-Avoidance Rules

Anti-Avoidance Rules prevent arrangements designed primarily to obtain tax advantages without genuine commercial substance.

General Anti-Avoidance Rule (GAAR)

GAAR empowers the FTA to disregard transactions lacking commercial purpose and undertaken solely to reduce Corporate Tax liability.

Commercial Purpose

Commercial Purpose means a transaction is undertaken for valid business reasons beyond merely achieving a tax benefit.

Tax Planning

Tax Planning involves structuring business operations efficiently while remaining fully compliant with UAE Corporate Tax laws.

Compliance Risk

Compliance Risk refers to the likelihood of penalties or audits due to incorrect tax treatment or inadequate documentation.

Tax Advisory

Tax Advisory services provide expert guidance on Corporate Tax compliance, structuring, and risk management for UAE businesses.

Corporate Tax Rate

The Corporate Tax Rate in the UAE is 9% on taxable income exceeding AED 375,000, with a 0% rate applicable to qualifying income.

Threshold

The Threshold is the minimum taxable income level above which Corporate Tax becomes payable under UAE law.

Exempt Income

Exempt Income includes dividends, capital gains from qualifying shareholdings, and other income specifically excluded from taxation.

Participation Exemption

Participation Exemption allows exemption of dividends and capital gains from qualifying shareholdings to avoid economic double taxation.

Qualifying Shareholding

A Qualifying Shareholding meets ownership and holding period criteria, enabling participation exemption benefits.

Holding Period

Holding Period refers to the minimum duration shares must be held to qualify for certain tax exemptions.

Ownership Threshold

Ownership Threshold defines the minimum percentage of ownership required to qualify for participation exemption or Tax Group formation.

Controlled Foreign Company (CFC)

A CFC is a foreign entity controlled by a UAE resident, potentially subject to anti-avoidance considerations.

Hybrid Mismatch

Hybrid Mismatch arises from differences in tax treatment between jurisdictions, which UAE Corporate Tax rules seek to neutralize.

Tax Neutrality

Tax Neutrality ensures that tax considerations do not distort genuine business decisions or restructuring activities.

Compliance Calendar

A Compliance Calendar outlines key Corporate Tax deadlines for registration, filing, payment, and disclosures..

Professional Firm

A Professional Firm includes licensed service providers such as accountants and consultants offering Corporate Tax compliance services.

Tax Agent

A Tax Agent is an FTA-approved professional authorized to represent taxpayers in Corporate Tax matters.

Authorized Signatory

An Authorized Signatory is a person legally empowered to submit Corporate Tax returns and communications on behalf of a business.

Disclosure Requirements

Disclosure Requirements mandate reporting of related-party transactions, exemptions claimed, and other material tax information.

Financial Statements

Financial Statements include balance sheets and profit and loss statements used as the starting point for Corporate Tax calculations.

IFRS

International Financial Reporting Standards (IFRS) are globally accepted accounting standards commonly used for UAE Corporate Tax reporting.

Audited Accounts

Audited Accounts are financial statements reviewed by independent auditors, often required for Free Zone and large entities.

Tax Governance

Tax Governance refers to internal controls and policies ensuring consistent and compliant Corporate Tax management.

Compliance Framework

A Compliance Framework integrates processes, documentation, and controls to meet Corporate Tax obligations effectively.

Tax Risk Management

Tax Risk Management identifies, evaluates, and mitigates risks related to Corporate Tax compliance and exposure.

Penalty Relief

Penalty Relief may be granted in specific circumstances, such as voluntary disclosure or reasonable cause for non-compliance.

Legal Entity

A Legal Entity is an organization recognized by law with separate rights and obligations under Corporate Tax legislation.

Business License

A Business License authorizes commercial activities in the UAE and determines Corporate Tax registration requirements.

Mainland Company

A Mainland Company is licensed by a UAE economic department and subject to Corporate Tax on its taxable income.

Branch

A Branch is an extension of a foreign or local company operating in the UAE and subject to Corporate Tax rules.

Compliance Review

A Compliance Review assesses a business’s Corporate Tax position to identify gaps, risks, and optimization opportunities.

Corporate Tax Consultant

A Corporate Tax Consultant provides specialized expertise in UAE Corporate Tax registration, compliance, planning, and FTA liaison, helping businesses remain compliant and tax-efficient.