The introduction of corporate tax in the UAE changed how companies, branches and free zone entities plan, report and pay tax. This short guide explains how taxable income is calculated under the UAE system and what practical steps companies should take. SS &Co provides accounting and tax services in Dubai and we have structured this guide to reflect real business calls and deadlines you will face.
What the law says?
The UAE introduced a federal corporate tax regime for financial years starting on or after 1 June 2023, with a headline 9 percent rate for taxable profits above the small-business threshold and a zero percent approach for certain qualifying free zone activities under the rules. The law builds on internationally accepted principles and sets out who is taxable, what income is subject to tax and the timing rules for tax periods. These changes are significant because they convert accounting profit into a tax base that is similar to other mature tax systems but tailored to UAE policy objectives.
Understanding these rules is the first step to applying accounting and tax services in Dubai correctly. Companies that get it right reduce both their effective tax cost and their operational friction with the Federal Tax Authority.
From accounting profit to taxable income
Calculating taxable income starts with the accounting profit for the tax period and then adjusts that number for tax purposes. The formula is straightforward in concept: start with financial statement profit, add back non-deductible expenses, subtract tax-deductible allowances that are not in the financial accounts, and apply any loss reliefs or carry-forwards allowed by the law. The result, after allowed adjustments and excluding exempt items, is your taxable income for the period, which is then taxed at the applicable rate. This is the basic working model used by accountants and tax advisers across the UAE.
To make this practical, companies must maintain records that reconcile accounting profit to taxable income. That reconciliation is not optional; it is the single most important schedule a business will file because it shows how profit reported in the financials translates into a tax position that the authority can audit.
Common adjustments you will encounter
There are recurrent categories of adjustments that frequently appear. Interest and financing costs are sometimes restricted. Related-party expenses are scrutinised for arm’s-length treatment. Depreciation for tax purposes may differ from accounting depreciation. Capital gains and losses follow specific rules. Losses may be carried forward or offset within limits. Some income streams, such as certain dividends and capital gains from qualifying shareholdings, may be exempt or partially excluded. The FTA guides and technical notes describe these adjustments and provide worked examples that help taxpayers make consistent treatment choices.
Free zone businesses often ask whether their qualifying free zone revenue is taxed. The law provides a framework to allow a 0 percent rate for qualifying income of a genuine free zone person, subject to de-minimis tests and substance requirements. The mechanics of isolating qualifying income require careful segmentation of revenue streams in the accounting records. Detailed guidance on free zone persons clarifies the boundaries and the evidence required to support a 0 percent position.
Practical steps to compute taxable income accurately
First, agree the tax period and the accounting profit for that period. Second, prepare a tax adjustment schedule that lists each add-back and deduction with a reference to the supporting accounting entry. Third, review related-party transactions and prepare transfer pricing documentation where relevant. Fourth, identify any exemptions, incentives or free zone reliefs and document the qualifying conditions. Fifth, calculate any tax credits or domestic minimum top-up (where applicable to large multinationals) and reconcile to tax payable. These five steps summarise the workflow that accounting and tax services in Dubai deliver for clients who want to be audit-ready.
This workflow is the operating model we use at SSCOGLOBAL when delivering accounting and tax services in Dubai, because it turns law and guidance into a repeatable process that finance teams can follow each quarter or year. The Federal Tax Authority’s return pack and guidance on taxable income should be used alongside company policies to ensure consistency.
Particular issues for multinational groups
Large multinational enterprises face an additional layer of complexity. The UAE has committed to international measures that include a domestic minimum top-up tax for groups that meet the consolidated revenue threshold under the OECD Two-Pillar solution. From the UAE’s announcements, a 15 percent minimum effective tax rate will apply to qualifying multinationals, with specific rules on calculation and top-up mechanics. For multinationals, the taxable income computation must be aligned with group reporting, consolidated adjustments and global effective tax calculations. (Reuters)
When groups calculate taxable income in the UAE, they must also consider potential differences between local tax rules and the global tax base used for Pillar Two calculations. This requires coordination between local tax teams, global tax centers and accounting functions to ensure the UAE return feeds cleanly into the group’s global tax compliance toolkit.
Record keeping, timing and compliance realities
The FTA expects taxpayers to keep records that demonstrate how taxable income was determined. Companies must file returns, keep reconciliations, and retain supporting documentation. Audits focus on high-risk items: related-party transactions, free zone qualification, large one-off adjustments and timing mismatches. Across the UAE, companies have registered in very large numbers with the authority since the reform. This level of registration underlines why robust record keeping and professional accounting and tax services in Dubai matter to both regulators and business owners. (The Times of India)
From a timing perspective, tax periods and filing deadlines are fixed. Businesses that miss deadlines face interest and penalties. The sensible approach is to treat tax reporting as an operational cycle that parallels month-end or quarter-end accounting, not as a one-off year-end activity.
Why professional advice is important?
Calculating taxable income in the UAE requires more than applying percentages. It requires judgment about classification, documentation and the application of reliefs. In situations involving free zone status, cross-border transactions, or group consolidation, the margin for error is material. Practical experience in preparing reconciliations, presenting positions to tax authorities and structuring records reduces both cost and friction. That is why companies contract professional accounting and tax services in Dubai to apply the law correctly and to avoid surprises. SS&Co combines tax technical expertise with hands-on accounting processes so that taxable income is reliable and defensible.
Final thoughts and next steps
Corporate tax in the UAE is now part of normal business operations. The mechanics of calculating taxable income are transparent: accounting profit adjusted for tax rules, documented and submitted. The strategic question for managers is not whether to comply, but how to design accounting and operational processes so that taxable income is predictable, optimised within the law and clearly supported by records. For companies operating in or through Dubai, engaging specialist accounting and tax services in Dubai will accelerate compliance and reduce the risk of costly post-filing adjustments.
