What is Fed Decree-Law No. 47 of 2022 in UAE corporaTe LAW

Last Updated on September 3, 2026 by Shitiz Srivastava

UAE Federal Decree-Law No. 47 of 2022 introduces a federal corporate income tax (CIT) for the first time outside of oil and foreign bank sectors.

It imposes a 0% tax on annual profits up to AED 375,000 and 9% on profits above that threshold, with special 0% rates for qualifying Free Zone income.

The law took effect 15 days after its publication (late 2022) and applies to financial years starting on or after 1 June 2023.

All resident businesses (corporations, branches, partnerships, etc.) and certain non-residents with UAE income are “Taxable Persons” subject to the law.

Exemptions include government entities, charities, some investment vehicles, and extractive industries meeting conditions.

Businesses must register with the Federal Tax Authority (FTA), keep records, and file annual tax returns, due 9 months after year-end.

Strict penalty rules apply for late filing, underpayment and non-compliance.

This guide breaks down the law’s scope, provisions, obligations and effects on UAE businesses, comparing it briefly to related UAE tax rules.

Read UAE Federal Decree-Law No. 47 of 2022 here :

Background and Context

UAE had long been a low-tax environment, no general corporate tax outside oil and banks.

In August 2022 the Ministry of Finance announced a new federal corporate tax to align with global standards (OECD Pillar Two) and diversify revenue.

The corporate tax law was issued 3 October 2022 by Presidential Decree by His Highness Sheikh Mohamed bin Zayed and published in the Official Gazette in late 2022.

It became effective 15 days after gazette publication (around Dec 2022) and applies to fiscal years beginning 1 June 2023 onward.

The aim is a “competitive, best-in-class” CIT regime, a 9% standard rate, 0% on the first AED 375k (for small businesses), with exemptions for various entities.

This marks a major change. UAE businesses must now pay tax on net profits, aligning the UAE with international norms while attempting to attract investment.

The law is part of a package including implementing regulations, as well as a 2023 amendment (Fed Decree-Law 60/2023) introducing a planned 15% “top-up tax” for multinationals per OECD rules.

For a structured breakdown of who is covered under the regime, read UAE Corporate Tax Explained for Indians (2026 Update).

Also Read : UAE’s New Legal Profession Law Made Simple: Federal Decree Law No. 34 of 2022 Explained

Scope and Key Definitions

Country and Law: The law is of the United Arab Emirates (UAE. Officially titled “Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses,” it is often called the UAE Corporate Tax Law.

Taxable Persons: “Taxable Persons” include all resident businesses and certain non-residents. A Resident Person is any company or other juridical entity incorporated or recognized under UAE law (including those in Free Zones), foreign companies effectively managed in the UAE, or individuals conducting a business in the UAE.

A Non-Resident Person is one not meeting residency but having a UAE permanent establishment (branch) or state-sourced income.

Essentially, virtually any company or business in the UAE must pay tax, except exempt categories below.

A foreign firm without a UAE PE generally pays tax only on UAE-source profits , for e.g. rental income, local sales.

Tax Period: Each Taxable Person is taxed on its “Taxable Income” for a defined tax period (usually its financial year). By default, tax periods align with a company’s financial year; special rules allow calendar year alignment if needed.

Taxable Income: As per Article 20 of the law, taxable income is generally the business profit shown in standalone financial statements which is prepared under IFRS or UAE-approved standards, adjusted by specific rules.

Certain item, for e.g. non-deductible expenses, exempt income, related party adjustments, are then added back or excluded.

Key Definitions: The law’s glossary (Article 1) includes terms like “Gross Income”, “Expenditure”, “Connected Person”, etc. Notable definitions are in the law, and implementing regulations.

For example, “Free Zone Person” means an entity satisfying conditions to benefit from Free Zone regime, “Qualifying Income” refers to income from certain qualifying activities, etc. Businesses should consult the full text for definitions relevant to their situation.

For cross-border implications, see India UAE Tax Treaty Explained 2026: Residency, DTAA & Double Tax Risks.

Main Provisions (by topic)

• Tax Rates and Threshold: A two-tier rate applies.
• 0% tax on annual profits up to AED 375,000 (cabinet‑set threshold, to support SMEs).
• 9% tax on taxable income above AED 375,000. Thus, small businesses and startups with profits under AED 375k owe no CIT. The Cabinet may revise the threshold by decision later. A special 0% rate applies to qualifying Free Zone income, while other income of Free Zone entities is taxed at 9%. A “Qualifying Free Zone Person” must meet substance and licensing criteria to get the 0% rate on eligible income.
• Who Pays: Article 11 makes “Resident” and “Non-Resident” persons subject to CIT. Both UAE-established companies and foreign branches (if they have a UAE PE) pay tax on net profits. Individuals are taxed only if they conduct business (e.g. sole proprietors) and earn above threshold. Passive investors typically are not taxed unless their income arises through a company or branch.
• Exempt Persons: Certain entities are fully exempt from CIT. Key exempt categories include:
• Government Entities (federal or emirate-level) and government-controlled entities.
• Extractive industries (oil, gas, mining) meeting conditions (detailed in Article 7 of the law).
• Non-extractive natural resource businesses meeting conditions (Article 8).
• Qualifying Public Benefit Entities (approved charities/NGOs).
• Qualifying Investment Funds (certain regulated investment funds).
• Pension/Social Security Funds under oversight of UAE authorities.
• Wholly-owned subsidiaries of exempt entities carrying out ancillary activities for the exempt parent.
• Other entities as designated by Cabinet decision. Exempt status often requires application to the FTA for formal recognition. For example, a qualifying fund must register as exempt. Government entities are exempt by default, unless they do business under license in a way that generates taxable income.
• Taxable Income and Deductions: Taxable Income is net profit after adjustments. Key rules are:
  • General basis: Start with net profit per audited financial statements (IFRS or UAE-recognized GAAP). Then add back nondeductible items and subtract exempt income and reliefs.
  • Deductions: Most business expenses are deductible if wholly for the business and not capital in nature. Common deductions include salaries, rent, cost of goods sold, depreciation per UAE tax depreciation rules, etc.
  • Non-deductible expenses: These include penalties, illegal payments, portion of related-party expenses not at arm’s length, VAT incurred, capital expenditures, and certain entertainment (only 50% deductible). Donations to non-approved charities and lobbying are not deductible.
  • Interest Limitation: Net interest expense is limited to 30% of adjusted EBITDA (general rule). Interest on related-party debt is further restricted, no deduction allowed for specific related-party financing. There is an additional 2.5% of revenue cap for interest (adopted from OECD BEPS rules).
  • Tax Losses: Losses may be carried forward (generally up to 5 years) and offset against future profits (subject to rules). The law allows loss carryforward, but not carry-back.
• Group Relief and Restructuring: Transfers between certain related companies or intra-group transfers can be sheltered (no gain/loss recognized) under “Qualifying Group” relief (Articles 26-27) if conditions are met. Two or more companies can elect to form a Tax Group and file a consolidated return, treating them as one taxpayer, under Article 40, if there is 95% common ownership and unanimous election.
• Exempt and Partially Exempt Income: Some income is exempt and excluded from taxable income.
• Domestic dividends: Dividend distributions from UAE companies are exempt regardless of ownership.
• Foreign dividends and capital gains: Exempt if the taxpayer owns ≥5% of the foreign company (or cost > AED 4m) held for ≥12 months.
• Income from foreign branches: UAE companies can elect to exclude income of a foreign permanent establishment if it was taxed abroad at ≥9% (to avoid double-tax).
• Other: Income from listed shares on UAE stock exchanges is exempt. Income from international transport (ships/aircraft) is exempt under Article 25 if conditions met, this preserves existing exemptions for airlines and shipping. Exempt income’s related expenses are non-deductible (added back).
• Free Zone Regime: The law preserves special tax treatment for “Qualifying Free Zone Persons”. These are companies licensed in certain Free Zones that meet substance conditions and do not derive oil/gas income or transact with a UAE mainland or foreign entity, other than upstream activities. A qualifying Free Zone person pays 0% CIT on its qualifying income but pays 9% on any non-qualifying business income. Essentially, most income within a free zone can remain tax-free, to encourage foreign investment.
• Withholding Tax: Article 45 sets a 0% withholding tax rate on payments from UAE sources, interest, dividends, royalties, etc. under the corporate tax law. In practice, the UAE does not currently levy any withholding on outbound payments. If a withholding rule is ever imposed by Cabinet, a credit mechanism is allowed. In summary, no new UAE WHT applies under this law.

To understand Indian residency impact, read ROR Status in India for NRIs and Dubai Residents: Legal Criteria and Tax Implications.

Compliance Obligations

• Registration: All Taxable Persons must register with the FTA to obtain a Tax Registration Number (TRN). Decision No.3 of 2024 sets specific registration deadlines. For example, existing UAE companies needed to apply by 31 May 2024, while new companies must register within 3 months of license issuance. Failure to register on time triggers a penalty of AED 10,000. Notably, only taxpayers and some exempt bodies seeking formal exemption register; foreign persons with only minimal UAE income and no PE may not need to register, Ministerial Decision No. 43 of 2023 clarifies that non-residents with UAE-source income only and no nexus/PE need not register.
• Bookkeeping and Records: Taxable Persons must keep business records and documents for 7 years. Article 56 of the law supplements the UAE Tax Procedures Law (Federal Law 7/2017) by requiring maintenance of financial statements, contracts, invoices, etc. Audited accounts may be required: any company with revenue > AED 50 million must have audited statements by a UAE-registered auditor, though FTA registration is based on management accounts.
• Financial Statements: Each Taxable Person computes CIT on standalone financial statements. Consolidated group accounts cannot be used except within a tax group filing as one entity. The law requires adherence to accounting standards, IFRS or IFRS for SMEs for small companies, for CIT computation.
• Tax Returns and Payments: CIT is annual. The first tax period for most companies runs up to the end of their financial year in 2024, if it covers 1 June 2023 onward. All taxable persons must file a tax return and pay due tax by 9 months after the end of their tax year. For example, a calendar-year taxpayer would file by 30 September each year. Per PwC, “All taxable persons are required to file a return within nine months from end of tax year, and pay within nine months”. No quarterly instalments are required (only final payment). Tax is paid in Dirhams.
• Small Business Relief: A resident taxpayer with revenue ≤ AED 3 million, and profit under threshold, may elect small business relief and be treated as having no taxable income, effectively exempt. This is an optional election to simplify compliance for micro-businesses.
• Filing Formalities: Returns are filed online via the FTA portal (EmaraTax) in Arabic, using fiscal-year financials. Tax returns must include income and expense details, exempt income schedules, related-party transactions disclosures, and any withholding tax credits claimed. The FTA may issue forms and guides (as it has via various decisions).

For global income exposure issues, refer to Global Income Taxation in India: What Dubai Residents Must Know.

Penalties and Enforcement

Violations of the Corporate Tax Law (and related tax rules) incur strict administrative fines. The Cabinet Decision No. 75/2023 (and amendment 10/2024) sets penalties.

Key penalties include:

Late Registration: AED 10,000 if registration application is filed after the deadline.

Late Filing: AED 500 per month after due date, increasing to AED 1,000 per month after one year.

Underpayment/Non-payment: Annual penalty of 14% of unpaid tax if due tax is not paid on time.

Incorrect Return: AED 500 penalty for a late or incorrect return unless corrected timely.

Adjusted Tax: If audit finds under-reported tax, a penalty of 1% per month on the unpaid amount (up to discovery) plus 15% of the total tax difference if uncovered by audit.

Non-cooperation: AED 20,000 fine for failing to cooperate with a tax audit.

Other Violations: Fines for failing to keep records (AED 10,000), refusing to submit documents (AED 20,000), failing to deregister when required, etc.

These penalties can accumulate, so businesses should file accurate returns and pay on time. In practice, the FTA will enforce compliance via audits and use the penalty regime in alignment with its Tax Procedures Law. Tax Procedures Law also has general offenses: e.g. up to 25% penalty for concealment, plus more in extreme cases.

Practical Implications for Businesses

• Accounting & Systems: Companies must adapt accounting to produce standalone financials on tax basis and keep detailed records. Many must hire auditors (if > AED 50m revenue). Businesses should train finance teams on new tax calculations (e.g. interest limits, depreciation rules) and set up processes for annual tax filings.
• Cash Flow: Even with a relatively low rate (9%), tax payments impact cash flow. Businesses should forecast tax liability based on 2023/24 profits, and budget funds by payment deadline. The 0% band up to AED 375k will exempt many small companies, but growing businesses must plan.
• Group and Structure Planning: Companies may consider forming a tax group to simplify reporting, treated as one entity, if parent and subsidiary each have 95% common ownership. This can allow intra-group loss relief and pooling. Corporate restructuring like mergers, asset transfers can be done tax-neutral under Articles 26-27 if carefully planned.
• Free Zones: Businesses in Free Zones should verify they meet “qualifying” criteria to retain 0% rates. This includes substance requirements like offices, staff and keeping Free Zone profits and UAE mainland profits separate. Some companies may need to apply for Free Zone status with FTA to benefit.
• Exemption Applications: Charities, funds or other potential exempt persons should apply to FTA to get formal exemption status. Likewise, companies in extractive industries should document compliance with Articles 7-8 conditions to claim exemption.
• Transfer Pricing and Related Parties: Transactions between related parties, especially cross-border, must be at arm’s length (Article 34). Businesses should review any intra-group pricing to ensure compliance, as adjustments will be made otherwise.
• Global Tax Planning: The UAE will implement a 15% minimum tax on large multinationals (Pillar Two) via a future law. Companies in MNE groups should monitor developments (Fed Decree-Law No.60/2023). Businesses will need to track OECD nexus rules and calculations.
• Advisory: Because of complexities (exemptions, elections, group relief), affected businesses should consult tax advisors or the FTA’s guidance. The FTA has issued guides and decisions (e.g. Ministerial Decision 134/2023 on taxable income rules) that elaborate on how to compute tax.

Read Dubai Decree No. 60 of 2023: Transfer of Government Employees – Full Text and Key Provisions here :

Comparison with Related Laws/Precedents

• Prior UAE Tax Regime: Before 2022, the UAE’s federal taxes were limited:
  • Value Added Tax (5%) introduced in 2018, Excise Tax on certain goods, and very limited corporate taxes (a 55% tax on oil/gas companies,
  • a 20% tax on foreign banks in some Emirates, etc.).
  • The new law replaces varied emirate-level taxes and creates a unified regime.
  • Notably, foreign banks have a separate tax in Dubai (20% under Dubai Law No. 1/2024), which gives credit for any 9% already paid under the federal law, avoiding double taxation.
• Tax Procedures Law: Corporate Tax is administered under the 2017 Tax Procedures Law (Fed Law 7/2017), which sets general audit and collection rules. Many procedural provisions (e.g. assessments, appeals) come from that law.
• International Standards: The law follows OECD “Base Erosion and Profit Shifting” (BEPS) guidelines: it includes an arm’s-length rule for related parties (Article 34), interest limitation (30%), participation exemption, etc. In mid-2023, the UAE amended the law (Fed Decree-Law 60/2023) to allow a 15% “Top-up Tax” on multinationals, fulfilling the OECD Pillar Two commitments. This Top-up Tax does not change the basic 9% regime now, but signals future rates for large MNEs.
• Comparison to Other Countries: At 9% (and 0% for SMEs), the UAE rate is very low by international standards. For example, GCC neighbors have higher rates (Saudi 20%, Oman 15%). The free zone 0% regime is comparable to special economic zones elsewhere. The introduction aligns the UAE with global norms, partly in exchange for signing onto the OECD tax framework, while keeping its competitiveness by low rates and broad exemptions.
• Precedents: The law itself draws on concepts from other jurisdictions (e.g. Ireland/UK for group relief, OECD guidelines for tax base). Similar to many systems, it imposes deadlines (nine months after year-end like UK/others) and requires registration akin to VAT. It is broader than, say, Federal Tax on Petroleum Profits (49/1975) which only taxed oil, and more comprehensive than any prior UAE tax.

For a broader investment perspective, see The Complete 2026 Guide for Indian Citizens Investing in Dubai Property.

Frequently Asked Questions (FAQs)

Also Read : Natural Person Corporate Tax in UAE: What Indian Freelancers & Sole Proprietors Need to Know

Major Provisions and Penalties

Provision	Detail	Penalty (if violated)
Tax Rates	0% on profit ≤ AED 375,000; 9% on excess.	N/A
Scope	Applies to UAE and certain non-UAE businesses	Failure to register: AED 10,000
Exempt Entities	Government, resources firms (if qualifying), charities, qualifying funds	Unauthorized claim: tax + penalties
Taxable Income	Net profit per IFRS statements, with adjustments and no double-counting exempt, add non-deductibles	Inaccurate return penalty: AED 500 (plus interest)
Deductions	Business expenses (capital allowance, interest limits, 50% entertainment)	Disallowed claim: disallowed by audit + penalties
Registration Deadline	By deadlines (e.g. existing firms: 31 May 2024)	Late registration: AED 10,000
Filing Deadline	9 months after tax year-end	Late filing: AED 500/month (→1,000 after 1yr)
Payment Deadline	9 months after tax year-end	Late payment: 14% per year on unpaid tax
Foreign Tax Credit	Available for foreign taxes paid (subject to rules)	N/A
Record-Keeping	Must keep books & documents 7 years	Incomplete records: fines up to AED 10,000
Underpayment Penalty	–	1% per month unpaid + 15% of tax shortfall
Audit Cooperation	–	Non-cooperation: AED 20,000

Note: Penalties are illustrative (see Cabinet Decision 75/2023 for full schedule, Click on the text to download the PDF ).

Timeline of UAE Corporate Tax (Fed Decree-Law No. 47 of 2022)

Date	Event	Significance
26 August 2022	Ministry of Finance announces federal corporate tax	Official policy announcement
03 October 2022	Federal Decree-Law No. 47 of 2022 issued	Legal framework formally introduced
December 2022	Law published in Official Gazette	Became effective 15 days later
01 June 2023	Corporate Tax applies to FYs starting on/after this date	Beginning of practical tax applicability
31 May 2024	Deadline for existing companies to register	Key compliance milestone

Comparison with Related Laws and Developments

• Pre-existing UAE taxes: Before this law, only oil/gas and foreign banks faced corporate tax, for eg. 20% on foreign banks, 55% or more on oil companies. All other businesses paid no income tax. The new law broadens tax to essentially all sectors. For banks, new emirate laws now coordinate with Fed CT – e.g. Dubai’s 2024 law gives credit for the 9% Fed tax.
• Tax Procedures: The corporate tax is administered under the UAE Tax Procedures Law (Fed Law 7/2017), which sets general filing, audit and appeal rules. Cabinet and Ministerial decisions supplement the CT law (e.g. rules on loss carryforward, tax grouping, fines).
• Global Context: The UAE CIT Law implements OECD BEPS elements (transfer pricing, interest caps, etc.) and ties into the Pillar Two framework. The UAE also issued Fed Decree-Law 60/2023 to add a 15% Top-up Tax on large multinationals, ensuring an effective rate ≥15%. That top-up tax is outside this law’s main provisions but shows future direction.
• Regional comparison: The UAE rate is among the lowest globally. Its 0% band for SMEs is more generous than most countries. This maintains UAE’s attractiveness for business while fulfilling international commitments as the UAE has signed OECD tax treaties and the global minimum tax agreement.

Conclusion and Next Steps

Federal Decree-Law No.47 of 2022 marks a milestone: the UAE’s broadest ever tax on business profits. While the headline 9% rate is modest, the law’s complexity like definitions, exemptions, compliance requirements, demands careful attention. Businesses should audit their current status under the law: identify their tax periods, review accounting systems, and determine if any exemption (e.g. free zone, charitable) applies.

They should register with FTA, ensure they can track taxable income vs. exempt income, and prepare for the first tax filing due 9 months after their 2024 year-end.

Key next steps to follow:

1. Review Entity Structure: Confirm if each company/branch is a “Taxable Person” and if grouping makes sense.
2. Update Accounting: Align financial reports with tax rules (e.g. depreciation lives, interest limits). Consider external auditor if turnover is high.
3. Assess Exemptions: Apply for any beneficial exemptions or reliefs (charity status, free zone benefits).
4. Learn Deadlines: Note the FTA’s registration and filing deadlines to avoid penalties.
5. Plan Cash Flow: Estimate 2023-24 profits to gauge tax liability; set aside funds for payment.
6. Seek Advice: Consult tax professionals for detailed compliance (especially on transfer pricing, group relief, or top-up tax implications).

Although some details (e.g. future cabinet rules on top-up tax or any threshold changes) remain to be finalized, the framework is now clear.

Businesses in the UAE should treat this law as a regular corporate tax and take proactive steps to comply.

Failing to do so risks fines, but timely preparation can minimize burden, especially given the favourable 0% bracket.

Sources

The analysis in this article is based on the following primary and secondary materials:

• Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses
• Federal Decree-Law No. 28 of 2022 on Tax Procedures
• Federal Decree-Law No. 60 of 2023 (OECD Pillar Two / Top-Up Tax amendments)
• Cabinet Decision No. 75 of 2023 on Administrative Penalties
• Cabinet Decision No. 73 of 2023 (Registration thresholds and filing requirements)
• Relevant Ministerial Decisions issued by the Ministry of Finance
• Federal Tax Authority (FTA) Corporate Tax Guides and Public Clarifications
• Official publications of the UAE Ministry of Finance
• OECD Pillar Two and BEPS framework documentation
• Professional tax commentary and comparative GCC tax analyses

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Disclaimer

This article is intended for general informational and educational purposes only. It does not constitute legal, tax, or financial advice. The UAE Corporate Tax Law contains detailed provisions, implementing regulations, and administrative decisions that may affect the interpretation and application of the rules described above.

Readers should consult the official legislation, Federal Tax Authority guidance, and qualified professional advisors before making any business or tax decisions. The author assumes no liability for reliance placed on the contents of this publication.

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Editorial Note

This guide is designed to provide a structured, plain-language breakdown of Federal Decree-Law No. 47 of 2022 for business owners, consultants, and legal professionals seeking clarity on the UAE corporate tax regime.

The law is evolving, with ongoing Cabinet Decisions, Ministerial guidance, and OECD-related developments shaping its implementation. This article will be periodically updated to reflect significant legislative or regulatory changes.

Readers are encouraged to verify current thresholds, deadlines, and compliance requirements with the Federal Tax Authority before filing or registration.