How is taxable income calculated in the UAE?
Accounting net profit adjusted for exempt income, non-deductible expenses, interest caps and reliefs — with 0% on the first AED 375,000 of the result and 9% above.
Taxable Income Calculation
Calculating Taxable Income Under UAE Corporate Tax
UAE corporate tax starts from your accounting profit — then adjusts it. The adjustments, not the rate, are where returns go wrong: exempt income stripped out, non-deductible costs added back, interest capped, reliefs applied. The 9% only lands on what survives.
- Full computation from financial statements to tax due
- Every adjustment documented and defensible
- Exemptions and reliefs applied, not overlooked
- Computation pack ready for any FTA review
Dubai-based, FTA-aware corporate tax filing support for UAE businesses.
Quick Answer
Start with accounting net profit under IFRS, then adjust: remove exempt income (qualifying dividends, participation-exemption gains, foreign PE income where elected), add back non-deductible items (50% of client entertainment, fines, donations to unapproved bodies), apply the interest deduction cap (30% of tax EBITDA above the safe harbour), and deduct available reliefs and carried-forward losses (up to 75% of taxable income). Tax is then 0% on the first AED 375,000 and 9% above.
IFRS profitThe computation's starting point
0% / 9%Bands split at AED 375,000
75%Cap on loss offset per year
30%EBITDA cap on net interest
The Adjustments That Matter Most
A handful of adjustments drive most computations. Exempt income — domestic dividends and qualifying participation gains — comes out entirely. Non-deductible costs go back in: half of business entertainment, all fines and penalties, owner drawings dressed as expenses. Related-party charges survive only at arm's length.
- Exempt: UAE dividends, qualifying participation gains
- Add back: 50% of entertainment, fines, non-business costs
- Related-party payments tested at arm's length
- Unrealised gains/losses follow the elected basis
Interest, Losses and Reliefs
Net interest expense deducts only up to 30% of tax EBITDA once above the safe-harbour threshold — highly leveraged businesses need this modelled, not discovered. Tax losses carry forward indefinitely but offset only 75% of a year's taxable income, and ownership changes beyond 50% can restrict them. Small business relief, where elected and eligible (revenue ≤ AED 3m), removes taxable income entirely for the period.
- Interest cap: 30% of tax EBITDA above the safe harbour
- Losses: indefinite carry-forward, 75% annual offset cap
- Continuity rules on losses through ownership changes
- SBR election: no taxable income at ≤ AED 3m revenue
From Computation to Defensible File
The FTA reviews computations by asking for the bridge: statement profit → adjustments → taxable income → tax, each line referenced to evidence. We build that bridge as we compute, so the return's numbers carry their own audit trail from day one.
- 1Financial statements finalised under IFRS
- 2Adjustment schedule built line by line with references
- 3Reliefs and elections applied and documented
- 4Bands applied; return figures tied to the computation pack
Taxable Income Calculation UAE FAQs
Are dividends taxable under UAE corporate tax?
Domestic dividends are exempt, and foreign dividends and capital gains can be exempt under the participation exemption where holding conditions are met.
How much entertainment expense is deductible?
50% of qualifying client entertainment; fines, penalties and non-business costs are not deductible at all.
How do tax losses work?
They carry forward indefinitely but can offset only up to 75% of taxable income in any year, subject to ownership-continuity conditions.
Do I need audited accounts for the computation?
Financial statements are the mandatory starting point; audit requirements depend on revenue thresholds and free zone status — QFZP claimants always need audited statements.
Sure About Every Adjustment?
The rate is 9%; the risk is in the bridge. We will build your computation line by line — exemptions, add-backs, caps and reliefs — into a file that survives review.
