UAE taxable income determination requires adjusting the accounting net profit or loss from Financial Statements under Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses. The standard Corporate Tax rate is 9% on taxable income exceeding AED 375,000, with 0% on income up to AED 375,000. Abdelhamid & Co. (MOE LC0106-01, FTA TAN 30003958) provides full Corporate Tax compliance services across Dubai, Sharjah, and the wider UAE.
What Is Taxable Income Under UAE Corporate Tax Law?
Taxable Income is the income subject to Corporate Tax under the Corporate Tax Law. The starting point for any business in Dubai, Sharjah, Abu Dhabi, or any UAE emirate is the accounting net profit or loss — referred to as Accounting Income — as reported in the company's Financial Statements prepared under IFRS or IFRS for SMEs.
A series of adjustments must then be made to Accounting Income to arrive at Taxable Income. These adjustments fall into two broad categories: items that must be deducted (such as Exempt Income) and items that must be added back (such as non-deductible expenses). The Corporate Tax services team at Abdelhamid & Co. specialises in performing these adjustments accurately.
Key Steps in UAE Taxable Income Calculation
| Step | Adjustment | Direction |
|---|---|---|
| 1 | Start with Accounting Net Profit / Loss (IFRS) | Base |
| 2 | Deduct Exempt Income (dividends, participation exemption) | Subtract |
| 3 | Add back Non-Deductible Expenses | Add |
| 4 | Apply Interest Deduction Limitation (30% EBITDA rule) | Adjust |
| 5 | Apply Tax Loss Relief (up to 75% of Taxable Income) | Subtract |
| 6 | = Taxable Income | Result |
| 7 | Deduct Foreign Tax Credit | Subtract |
| 8 | = Corporate Tax Payable | Final |
UAE Corporate Tax Rates — Key Figures
| Income Tier | Corporate Tax Rate | Notes |
|---|---|---|
| AED 0 – 375,000 | 0% | Small Business Relief threshold |
| Above AED 375,000 | 9% | Standard rate for mainland businesses |
| Qualifying Free Zone Income | 0% | Conditions apply under Article 18 |
| Large Multinationals (Pillar Two) | 15% | Global minimum tax (future applicability) |
For businesses in Dubai Internet City, Sharjah Media City, or JAFZA, Free Zone rules under Article 18 of the Corporate Tax Law may apply. Our team assesses eligibility for each client individually.
Accounting Standards and Financial Statements Requirements
All Taxable Persons in the UAE must prepare Financial Statements in accordance with IFRS. However, businesses earning Revenue not exceeding AED 50 million may apply IFRS for SMEs, which simplifies some measurement and disclosure requirements.
Businesses with Revenue exceeding AED 50 million during the relevant Tax Period are required to maintain audited Financial Statements prepared by a UAE-registered auditor under Federal Law No. 41 of 2023. Abdelhamid & Co. (Ministry of Economy Reg. No. LC0106-01) is authorised to perform statutory audits for Corporate Tax purposes in Sharjah, Dubai, and across the UAE.
Cash Basis vs. Accrual Basis of Accounting
Businesses earning Revenue not exceeding AED 3 million in a Tax Period may use the Cash Basis of Accounting, recognising income when received and expenses when paid. Once Revenue exceeds AED 3 million, the Accrual Basis becomes mandatory — meaning income is recognised when earned and expenses when incurred, regardless of cash flow timing.
Example: A Sharjah trading company earns AED 2.8 million in FY2024 — it may elect Cash Basis. In FY2025 its revenue grows to AED 4.2 million — it must switch to Accrual Basis for that year.
Exempt Income — What Is Not Taxed in the UAE?
Certain income categories are fully exempt from Corporate Tax. The main exemptions relevant to UAE businesses include:
- Domestic Dividends: Dividends received from a UAE-resident juridical person are exempt — no conditions required.
- Participation Exemption: Dividends and capital gains from a foreign shareholding of at least 5% are exempt if conditions under Article 23 of the Corporate Tax Law and Ministerial Decision No. 116 of 2023 are met.
- Foreign Permanent Establishment Exemption: Income attributable to a UAE company's foreign branch is exempt from UAE Corporate Tax if the foreign PE is subject to a minimum 9% tax rate.
The exemption is symmetrical — expenditure incurred to derive exempt income is generally not deductible, preventing double benefit.
Common Mistakes UAE Businesses Make in Taxable Income Calculation
- Failing to add back entertainment expenses exceeding the 50% deductibility limit
- Treating related-party payments not at arm's length as fully deductible
- Missing the 30% EBITDA cap on net interest deductions for businesses with interest exceeding AED 12 million
- Ignoring unrealised gains and losses when no realisation basis election was made in the first Tax Period
- Incorrectly classifying capital expenditure as revenue expenditure
Our team at Abdelhamid & Co. in Sharjah performs detailed Corporate Tax Compliance Reviews to identify and correct these issues before filing.
Why Choose Abdelhamid & Co. for UAE Corporate Tax Compliance?
Abdelhamid & Co. is a licensed FTA Tax Agent (TAAN No. 20033908) and registered with the Ministry of Economy (LC0106-01). Our firm serves clients across Dubai, Sharjah, Ajman, Abu Dhabi, and all UAE emirates in English and Arabic. We offer fixed-fee Corporate Tax packages covering registration, taxable income computation, return filing, and compliance review.
Frequently Asked Questions — UAE Taxable Income
What is the starting point for UAE taxable income determination?
The starting point is the Accounting Income — the net profit or loss per the Financial Statements prepared under IFRS or IFRS for SMEs. Adjustments are then made to arrive at Taxable Income.
What is the UAE Corporate Tax rate for taxable income above AED 375,000?
The standard rate is 9% on Taxable Income exceeding AED 375,000. Income up to AED 375,000 is taxed at 0%.
Are dividends from UAE companies exempt from Corporate Tax?
Yes. Dividends received from a UAE-resident juridical person are fully exempt under Article 22 of the Corporate Tax Law, with no additional conditions required.
Can Dubai and Sharjah businesses use Cash Basis of Accounting for Corporate Tax?
Yes, businesses with Revenue not exceeding AED 3 million in the Tax Period may use Cash Basis. Above AED 3 million, Accrual Basis is mandatory.
What is the taxable income determination process for a UAE Free Zone company?
Free Zone companies follow the same determination process but may benefit from a 0% rate on Qualifying Income if they meet the conditions under Article 18 of the Corporate Tax Law and Ministerial Decision No. 139 of 2023.
Related Corporate Tax Services
Explore our full range of Corporate Tax services including CT Return Filing, Compliance Review, and Small Business Relief. For related reading, visit our Insights page. Official guidance is available at the Federal Tax Authority.
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