UAE Corporate Tax — What Is Taxable Income?
UAE Corporate Tax is calculated on taxable income, which starts from your accounting net profit (as reported in your financial statements) and is then adjusted for specific items under the CT Law.
The Formula
Taxable Income = Accounting Net Profit ± CT Adjustments
Items That Increase Taxable Income (Added Back)
These expenses are not deductible under CT Law:
- Fines and penalties (excluding contractual penalties)
- Bribes and illicit payments
- 50% of entertainment and hospitality expenses
- Personal expenses of owners not incurred for business purposes
- Losses on exempt transactions
- Expenses relating to exempt income
Items That Reduce Taxable Income (Deductions)
These amounts reduce taxable income beyond what is in your accounts:
- Dividends from UAE subsidiaries — exempt (participation exemption)
- Capital gains on qualifying shareholdings (≥5% for ≥12 months)
- Interest deductions — fully deductible except for related-party interest subject to the 30% EBITDA cap
- Depreciation and amortisation — deductible at accounting rates (in most cases)
- Salary and staff costs — fully deductible
The AED 375,000 Zero-Rate Band
The first AED 375,000 of taxable income is taxed at 0%. Only income above AED 375,000 is taxed at 9%.
Tax Losses
Losses can be carried forward and offset against future taxable income (up to 75% of taxable income in any given year). Losses cannot be carried back.
Financial Statements Are the Starting Point
This is why accurate, IFRS-compliant financial statements are critical — the quality of your accounting directly determines the accuracy of your CT calculation.
Kounted prepares CT-ready financial statements and handles the full CT return filing, including loss calculations and exempt income analysis.