UAE resident legal entities will be liable to pay UAE Corporate Tax on their earnings generated both within the UAE and overseas. However, specific types of income earned through foreign subsidiaries and income from foreign branches subject to taxation in another jurisdiction are typically exempt from UAE Corporate Tax.

When income earned abroad is not exempt, individuals or businesses can claim a credit for foreign income taxes paid to avoid double taxation .Non-Resident Persons will only be liable for UAE Corporate Tax in the following cases:

• Income linked to their Permanent Establishment in the UAE.
• Income linked to a nexus in the UAE as determined by Cabinet Decision No. 56 of 2023.
• Income sourced within the UAE, subject to a 0% Withholding Tax.

How is Taxable Income determined for UAE Corporate Tax?      

Taxable Income for a given Tax Period is calculated as the net profit (or loss) reported in a business’s financial statements following International Financial Reporting Standards (IFRS). Adjustments are made for various items specified in the Corporate Tax Law and related implementing decisions, including:

• Unrealized gains and losses (based on the chosen application of the realization principle).
• Exempt Income, such as qualifying dividends and capital gains.
• Gains or losses from transfers within a Qualifying Group.
• Gains or losses from transfers in qualifying business restructuring transactions per Article 27 of the corporate tax law.
• Deductions not allowable for Corporate Tax purposes.
• Transactions with Related Parties and Connected Persons.
• Transfers of Tax Losses within a group meeting relevant conditions.
• Incentives or tax reliefs.
• Any other adjustments as specified by the Minister