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September 24, 2022 Finance & Accounting

The Complete Corporate & Withholding Tax Guide For Businesses In The UAE

After reading this complete guide, you’ll understand exactly how corporate and withholding taxes work in the UAE and how they can impact your business—for better or worse. You’ll learn about all of the different taxes that your business might be subject to, as well as which tax credits and tax exemptions you can take advantage of to help keep your company’s bottom line healthy. Finally, they’ll discuss some ways that you can legally minimize your UAE corporate and withholding taxes so that you can keep more of your profits in your pockets. The corporate and withholding tax laws in the UAE are among the most complex in the world, but with help from this complete guide, you’ll be able to file your taxes quickly and easily while keeping your business compliant with local regulations. 

Corporate Tax

Corporate tax refers to the tax paid by a company on its total income. Income is usually defined as the value of goods and services sold minus any costs associated with producing those goods and services. Profit, or net income, is what remains after all costs have been deducted from sales. A company’s profit may be distributed among shareholders in the form of dividends. Dividends are typically a percentage of the share price but can also be set at fixed amounts per share or in proportion to how many shares you own. Corporate tax is calculated by applying an annual rate to all profits generated during that year (using a progressive system) and then deducting any allowable deductions from that amount.

The Process Of Paying Corporate Taxes In The UAE

There are two ways that corporate tax in UAE can be paid: annually or monthly. If you pay yearly, your withholding tax payments will not change and will remain at the same rate throughout the year. If you choose to pay monthly, then you’ll need to deposit 25% of your total quarterly profits every month into a government-approved bank account designated by the Ministry of Finance. You will also be charged an additional 1% on corporate tax in UAE for each month that is not completed. So if you don’t make a payment for three months, you’ll end up paying 4%. It’s important to note that these rates only apply if you’re considered an eligible company with a fixed place of business in the UAE. If this isn’t true for you, then you won’t have any taxes withheld from your business income.

How To Reduce Your Corporate Tax Burden In The UAE

Companies in the UAE are required to withhold taxes from their employees and are expected to pay corporate tax on profits. This can be a high cost of doing business. However, there are a number of ways that companies can reduce their tax burden. Some options include: 

1) Make sure you have the appropriate company structure in place. 

2) Setting up an offshore subsidiary

3) Taking advantage of government incentives

4) Ensuring compliance with trade laws 

5) Finding alternative financing

6) Utilizing efficient processes

7) Working with an experienced team.

Withholdings Taxes

Withholding taxes are one of the most common types of tax in the UAE. They are a form of taxation that occurs when you pay an employee or contractor. Essentially, the withholdings tax is the amount that you deduct from your employee’s paycheck before it is transferred to their bank account. This money is then held by the employer until it is time for them to make their monthly withholding tax payments to the government. Often, there will be two withholding taxes deducted: one for Income Tax and another for Social Security and Labor Laws (SAL). These two taxes are calculated at different rates depending on whether or not your company provides a pension plan or health insurance.

The Process Of Paying Withholdings Taxes In The UAE

Withholding taxes are essentially taxes that are paid by the employer on behalf of the employee. When a worker is hired, the employer must pay these taxes on their behalf. Here’s how to pay withholdings taxes in the UAE: 

1) Find out if you’re required to withhold any withholding tax. If your company has at least one non-UAE national or if you have a resident who isn’t employed but receives income from your company (such as dividends or interest), then yes, you’ll need to make these payments. Otherwise, no withholding tax is needed for employees working in the UAE.

2) Ask for documents from your new hire that include their ID and employment contract. You will also need this information to fill out an Employee Withholding Request Form.

3) Fill out the form with all the information about your employee, including the percentage of tax you want them withheld. 

4) Send this form with copies of their passport and work permit to the Central Bank of Dubai or Abu Dhabi Federal Tax Authority so they can issue a Letter of Approval that shows what percentage of tax should be withheld each month.


We hope this guide has shed some light on the corporate tax and withholding tax for businesses in the UAE. If you’re looking for any more information, ForthrightConsultancy can help you. They offer a variety of services, including accounting, bookkeeping, and taxes. The process of starting a new business is exciting and intimidating all at once. They will help you understand the basics of corporate and withholding taxes in the UAE and can advise you on what to do next. So get in touch with them today to get your free consultation.