For years, setting up in the UAE meant speed, access, and near zero corporate tax. While speed and access remain, the tax landscape has changed. The UAE introduced Corporate Tax for financial years starting on or after June 01, 2023. The rate is 0 percent on taxable profits up to AED 375,000 and 9 percent above that.
While 9 percent remains globally competitive, the real change is increased scrutiny. The UAE now expects consistency between audited financials and business reality, not just presentations. This shift improves credibility at a time of tighter banking checks, investor scrutiny, and OECD driven anti avoidance rules.
For Indian companies raising global capital or serving regulated clients, this credibility is strategically important. The new tax regime also encourages stronger governance, real substance, documented board decisions, and disciplined finance practices.
One key myth needs correction. Free zone does not mean 0 percent forever. A free zone entity can access the 0 percent rate on Qualifying Income only if it qualifies as a Qualifying Free Zone Person. This requires adequate substance, audited financials, and transfer pricing compliance. Non qualifying revenue must stay within the lower of AED 5 million or 5 percent of total revenue. Failure can result in loss of status for the year of breach and the next 4 tax periods.
The rules are clearly defined. Qualifying activities include manufacturing, logistics, treasury and financing services to related parties, and distribution from designated zones. This supports genuine regional platforms rather than “bare bones billing address” structures.
Mainland or free zone decisions should reflect business reality. UAE domestic market access may require a mainland setup, while regional hubs can still benefit from free zones if compliance and substance are in place.
The UAE remains business friendly. What has changed is the need for real operations, not just registration. For Indian businesses, this shift is not a setback but a chance to build stronger, more credible global structures. And if you miss the old tax free UAE, remember, “the sunshine is still exempt!”
Also read: Viksit Workforce for a Viksit Bharat
Do Follow: The Mainstream formerly known as CIO News LinkedIn Account | The Mainstream formerly known as CIO News Facebook | The Mainstream formerly known as CIO News Youtube | The Mainstream formerly known as CIO News Twitter
About us:
The Mainstream is a premier platform delivering the latest updates and informed perspectives across the technology business and cyber landscape. Built on research-driven, thought leadership and original intellectual property, The Mainstream also curates summits & conferences that convene decision makers to explore how technology reshapes industries and leadership. With a growing presence in India and globally across the Middle East, Africa, ASEAN, the USA, the UK and Australia, The Mainstream carries a vision to bring the latest happenings and insights to 8.2 billion people and to place technology at the centre of conversation for leaders navigating the future.
