UAE Corporate Tax Glossary

Corporate Tax UAE

Federal tax imposed on business profits in UAE to enhance transparency, economic sustainability, and alignment with international tax standards.

Taxable Person

Any individual or entity subject to UAE Corporate Tax, including juridical persons and qualifying natural persons conducting business.

Taxable Income

Net profit or loss calculated under UAE Corporate Tax Law after adjusting accounting income for allowable deductions exemptions.

Accounting Income

Profit or loss reported in financial statements prepared under IFRS or acceptable accounting standards before tax adjustments.

Tax Period

Financial year or accounting period for which taxable income is calculated and corporate tax return submitted to authorities.

Federal Tax Authority

UAE government authority responsible for administration, assessment, collection, and enforcement of federal taxes including corporate tax.

Corporate Tax Return

Official declaration submitted to FTA reporting taxable income, exemptions, reliefs, and corporate tax payable within prescribed timelines.

Tax Rate

Percentage applied to taxable income determining corporate tax payable, currently including zero percent and standard rate thresholds.

Zero Percent Rate

Preferential corporate tax rate applied to qualifying taxable income below specified threshold under UAE Corporate Tax Law.

Standard Rate

Corporate tax rate applicable on taxable income exceeding zero percent threshold as prescribed by UAE regulations.

Exempt Person

Entity or individual excluded from corporate tax such as government entities, pension funds, and qualifying public benefit entities.

Government Entity

Federal or Emirate government body exempt from UAE Corporate Tax when performing sovereign or mandated activities.

Public Benefit Entity

Nonprofit organization meeting FTA conditions eligible for corporate tax exemption supporting charitable or public welfare objectives.

Qualifying Free Zone Person

Free zone entity meeting substance and compliance requirements eligible for zero percent corporate tax on qualifying income.

Free Zone

Designated economic area offering tax incentives subject to compliance with UAE Corporate Tax and substance regulations.

Qualifying Income

Income eligible for zero percent corporate tax earned by qualifying free zone persons from approved activities.

Non-Qualifying Income

Income not meeting conditions for preferential tax treatment subject to standard corporate tax rates.

Permanent Establishment

Fixed place of business through which nonresident conducts business in UAE creating corporate tax obligations.

Nonresident Person

Entity without UAE residency but subject to corporate tax due to permanent establishment or UAE sourced income.

UAE Sourced Income

Income derived from activities, assets, or rights located or used within UAE territory.

Economic Substance Regulations

Rules ensuring entities have adequate operations, employees, and assets in UAE aligned with business activities.

Transfer Pricing

Pricing of transactions between related parties ensuring arm’s length principle compliance under UAE Corporate Tax Law.

Arm’s Length Principle

Requirement that related party transactions reflect pricing comparable to independent market transactions.

Related Parties

Persons or entities with ownership, control, or influence relationships requiring transfer pricing compliance.

Connected Persons

Individuals or entities related to taxable person requiring specific treatment of payments under corporate tax rules.

Transfer Pricing Documentation

Records including master file and local file demonstrating arm’s length compliance for related party transactions.

Small Business Relief

Optional relief allowing eligible small businesses to be treated as having no taxable income under conditions.

Tax Group

Two or more UAE resident companies treated as single taxable person subject to meeting ownership and control conditions.

Tax Grouping

Process allowing eligible companies to consolidate taxable income and file single corporate tax return.

Group Relief

Transfer of tax losses between group entities subject to conditions reducing overall corporate tax liability.

Tax Loss

Excess of deductible expenses over taxable income that may be carried forward or offset subject to limitations.

Loss Carry Forward

Ability to offset future taxable income using previous period tax losses under prescribed rules.

Loss Utilization Limit

Restriction on percentage of taxable income that can be offset using carried forward tax losses.

Exempt Income

Income excluded from taxable income such as dividends and capital gains meeting participation exemption criteria.

Participation Exemption

Exemption allowing dividends and capital gains from qualifying shareholdings to be excluded from taxation.

Capital Gains

Profit arising from disposal of capital assets potentially exempt or taxable under UAE Corporate Tax Law.

Dividend Income

Profit distribution received from shareholdings potentially exempt from corporate tax under participation exemption.

Withholding Tax

Tax deducted at source on specified payments to nonresidents currently set at zero percent in UAE.

Foreign Tax Credit

Credit allowing offset of foreign taxes paid against UAE corporate tax on same income.

Tax Residence

Status determining whether person is subject to UAE corporate tax on worldwide or UAE sourced income.

Resident Person

Entity incorporated or effectively managed and controlled in UAE subject to corporate tax obligations.

Effective Management

Place where key management and commercial decisions necessary for business conduct are made.

Tax Deregistration

Process of removing taxable person from corporate tax register upon cessation or eligibility conditions met.

Tax Registration

Mandatory process of registering with FTA for corporate tax purposes within prescribed timeframe.

Compliance Obligations

Mandatory requirements including registration, record keeping, filing returns, and payment of corporate tax.

Tax Invoice

Document evidencing taxable transaction primarily relevant for VAT but supporting income verification for corporate tax.

Record Keeping

Obligation to maintain accounting and tax records for minimum prescribed period under UAE law.

Tax Assessment

Determination by FTA of tax payable based on return submitted or audit findings.

Tax Audit

Examination conducted by FTA to verify accuracy of corporate tax return and compliance.

Administrative Penalties

Fines imposed for noncompliance such as late registration, filing, or inaccurate reporting.

Late Filing Penalty

Penalty imposed for failure to submit corporate tax return within prescribed deadline.

Late Payment Penalty

Financial penalty applied for failure to pay corporate tax due within stipulated timeframe.

Tax Evasion

Illegal act of intentionally misrepresenting information to reduce tax liability subject to severe penalties.

Tax Avoidance

Use of legal arrangements to minimize tax liability within framework of law subject to scrutiny.

General Anti-Avoidance Rule

Provision empowering FTA to disregard transactions lacking commercial substance aimed at obtaining tax advantages.

Commercial Substance

Genuine economic purpose and business rationale underlying transactions beyond achieving tax benefits.

Accrual Basis

Method recognizing income and expenses when earned or incurred regardless of cash movement.

Cash Basis

Method recognizing income and expenses only upon receipt or payment subject to FTA approval.

Accounting Standards

IFRS or other acceptable frameworks used to prepare financial statements for corporate tax computation.

Adjustments

Modifications made to accounting income to arrive at taxable income under corporate tax law.

Deductible Expenses

Costs incurred wholly and exclusively for business purposes allowed as deduction for tax calculation.

Non-Deductible Expenses

Expenses disallowed for corporate tax such as fines, penalties, and certain entertainment costs.

Interest Deduction Limitation

Restriction on deductible net interest expense to prevent excessive debt financing erosion.

Net Interest Expense

Excess of interest expenses over interest income subject to limitation rules.

General Interest Cap

Limitation restricting deductible interest to percentage of EBITDA under UAE Corporate Tax Law.

Exempt Activities

Specific activities generating income exempt from corporate tax such as qualifying investment operations.

Extractive Business

Oil and gas extraction activities subject to Emirate level taxation outside federal corporate tax.

Non-Extractive Natural Resources

Mining and quarrying activities taxed at Emirate level excluded from federal corporate tax.

Transitional Rules

Provisions governing treatment of assets and liabilities existing before corporate tax implementation date.

Opening Balance Sheet

Financial position at start of first tax period used for corporate tax calculations.

Tax Period Election

Choice of tax period alignment with financial year subject to FTA approval.

Tax Agent

Authorized representative registered with FTA to act on behalf of taxable person.

Tax Consultant

Professional advisor assisting businesses with corporate tax planning, compliance, and advisory services.

Substance Requirements

Operational criteria ensuring real economic presence for preferential tax treatment eligibility.

Documentation Requirements

Mandatory records supporting income, expenses, transfer pricing, and exemptions for audit purposes.

Filing Deadline

Prescribed last date for submission of corporate tax return following end of tax period.

Payment Deadline

Due date for settlement of corporate tax liability without incurring penalties.

Voluntary Disclosure

Submission correcting errors or omissions in tax return to mitigate penalties.

Reconsideration Request

Formal appeal submitted to FTA challenging tax assessment or administrative penalties.

Tax Dispute Resolution

Process of resolving disagreements with FTA through objections and legal channels.

Advance Pricing Agreement

Agreement with tax authority determining transfer pricing methodology for future related party transactions.

Foreign Permanent Establishment

Fixed place of business outside UAE impacting tax residence and foreign tax credit eligibility.

Branch

Extension of foreign or local company subject to corporate tax on UAE business profits.

Partnership

Business arrangement where partners share profits subject to transparent or taxable treatment under law.

Unincorporated Partnership

Partnership not treated as separate legal person unless elected otherwise for tax purposes.

Sole Establishment

Business owned by individual subject to corporate tax if conducting taxable activities.

Business Activity

Any continuous commercial, industrial, professional, or vocational activity conducted for profit.

Passive Income

Income from dividends, interest, or royalties subject to specific tax treatment.

Royalties

Payments for use of intellectual property potentially subject to withholding tax rules.

Double Taxation Agreement

Treaty between UAE and another country preventing income being taxed twice.

Tax Treaty Relief

Reduction or elimination of tax based on provisions of applicable double taxation agreement.

Foreign Entity

Non-UAE incorporated business potentially subject to corporate tax on UAE sourced income.

Controlled Foreign Company

Foreign entity controlled by UAE resident potentially relevant for international tax considerations.

Tax Planning

Strategic structuring of business activities to lawfully minimize corporate tax exposure.

Compliance Calendar

Schedule tracking registration, filing, payment, and reporting deadlines for corporate tax.

Tax Governance

Framework ensuring accountability, compliance, and risk management in corporate tax matters.

Corporate Restructuring

Reorganization of business structure potentially eligible for tax neutrality relief.

Tax Neutrality

Treatment allowing restructuring without immediate tax impact subject to conditions.

FTA Portal

Online platform for corporate tax registration, return filing, payments, and correspondence.

Corporate Tax Advisory

Professional service providing guidance on UAE corporate tax compliance, planning, structuring, and risk mitigation.