UAE CT Law

The UAE released the Federal Decree-Law No. (47) of 2022 on the Taxation of Corporations and Businesses (CT Law) on December 9, 2022. The CT Law was published in the Official Gazette on October 10, 2022 and became effective on October 25, 2022. The CT Law applies to Taxable Persons for financial years commencing on or after June 1, 2023. The general anti-abuse rules apply from the date the CT Law was published in the Official Gazette (October 10, 2022).

The CT Law imposes corporate tax on juridical persons — including resident persons such as corporations, partnerships, foundations, and nonresident entities with a permanent establishment or nexus in the UAE or deriving UAE-sourced income — and on individuals (natural persons) engaged in a business or business activity.

Recent updates

Since the CT Law was released in December 2022, a number of Decisions have been issued (c. 31 decisions, refer to the list of the relevant PwC alerts below), which provide further detail and elaborate on the tax regime’s provisions, including:

• tax residency and nonresident nexus,
• small business relief,
• tax registration and exemption from registration,
• transfer pricing (TP) documentation,
• deemed exempt person,
• accounting standards and audited financial statements,
• participation exemption,
• transitional rules adjustments,
• tax grouping,
• free zones qualifying and excluded activities and qualifying income,
• interest deduction limitations,
• unincorporated and foreign partnerships and family foundations,
• conditions for Qualifying Investment Funds, and
• business restructuring relief and transfers within a Qualifying Group.

The UAE MoF issued an Explanatory Guide to the CT Law, which explains the meaning and intended effect of each article of the CT Law on May 12, 2023. On September 11, 2023, the FTA published the CT Guide, which provides further guidance to the CT Law and relevant Decisions. The CT Guide was complemented with the Exempt Income Guide and TP Guide published by the FTA on October 16, and October 23, 2023.

In addition, the MoF and FTA have published a list of frequently asked questions (FAQs) relating to the CT Law on their respective websites. These are updated regularly.

Observation: The Explanatory Guide, CT Guide, Exempt Income Guide, TP Guide, and FAQs are not law and have no legal power.

Exempt Income Guide

The Exempt Income Guide is meant to help understand the CT Law exemption for dividends and the participation exemption. Similar to the CT Guide, the Exempt Income Guide also refers to the CT Law and relevant Decisions and covers:

• the definition of the dividends and other profit distributions;
• which income (and related expenditure) from a participation is exempt;
• who is eligible for the exemption;
• how the participation exemption operates; and
• the related implications for tax groups.

Observation: The guide does not cover unincorporated partnerships.

In line with the CT Guide, the Exempt Income Guide also provides a number of examples and decision trees illustrating how the key elements of the relevant exemptions apply. 

TP Guide

The TP Guide takes into consideration the guidance provided by the OECD Transfer Pricing Guidelines and provides general guidance on the UAE TP regime. The guide includes an overview of the TP rules and procedures covering:

• how to identify related parties, connected persons, and relevant transactions and arrangements;
• explanation and examples for applying the TP methods to different scenarios and business activities and guidance on selecting the most appropriate TP method;
• guidance on how to determine the arm’s-length price; and 
• an overview of the related compliance requirements and TP documentation requirements.

Similar to the CT Guide, the TP Guide refers to the CT Law and relevant Decisions and includes numerical and narrative examples to explain key TP concepts and related aspects, including the arm’s-length principle, related party and connected person, ownership, control, kinship and affiliation, and controlled transaction.

Observation: UAE businesses should rely primarily on the CT Law and relevant Decisions and look for guidance from the TP Guide. The guide should be the primary source for TP-related matters prevailing over international standards. However, if a certain aspect is not covered in the above documents, UAE businesses are encouraged to refer to the OECD Transfer Pricing Guidelines.