25 Must-Know Terminologies for UAE Corporate Tax Payers

Are you starting a business in the UAE, or already operating one? Then you obviously know about the corporation tax in the UAE, launched in June 2023 and evolving fast. But when you dig in deep, the terminology can feel like a foreign language. So, knowing your way around the key tax terms isn’t optional anymore; rather, it’s essential.

With the Federal Tax Authority (FTA)-administered corporate tax regime in full swing, your company’s survival and growth depend on staying tax-compliant.

Today, we’ll talk about the key definitions every UAE corporate taxpayer must understand right now.

Why We Must Know the Terminologies

The Federal Tax Authority (FTA) and the Ministry of Finance built the UAE’s corporate tax regime (under Federal Decree‑Law No. 47 of 2022) to align with global standards while still holding UAE investment appeal.

In this scenario, if you misunderstand a term, like “taxable income” or “free zone person”, you could miscalculate liability, miss filing deadlines, or lose benefits. We’re in 2025 now. So, the rules and thresholds are live, and you can’t treat this like a regular draft.

Getting the wording right means you’re not just compliant, you’re proactive. Also, knowing these terms and their definitions always keeps you ahead by improving your planning and increasing your confidence.

Must-Know Terms for UAE Corporate Tax Payers

1. Federal Tax Authority (FTA):

This is the government body in the UAE, responsible for administering federal taxes here, including the corporate tax regime. This government body sets the registration, filing, and payment rules, issues guidance, and most crucially, manages compliance.

2. Tax period:

In the UAE, a tax period generally means the financial year for which a corporate tax return must be filed. For example, if your company has a 1 July to 30 June year-end, then that 12-month span is your tax period.

3. Corporate tax:

Corporate tax is the federal tax that is charged on the net profit of businesses under the UAE law.

4. Corporate tax rate:

In the UAE, if your taxable income is up to AED 375,000, then you’ll be taxed at 0%. But if your income goes above that, then the tax rate will be 9%. For free-zone entities that meet qualifying criteria, 0% applies to their “qualifying income”. You can use an accounting software like Tally Prime to calculate your tax rate.

5. Free Zone Person (FZP):

Here, the term Free Zone Person is generally used for a company that is incorporated, established, or registered in a UAE Free Zone. They might benefit from special tax treatment.

6. Qualifying Free Zone Person (QFZP):

A QFZP is a Free Zone Person that meets all the prescribed conditions so that their certain income qualifies for 0 % CT rate.

7. Qualifying Income:

Qualifying Income means the income earned by a QFZP from specified transactions (exporting goods to foreign markets, which is free from UAE Tax). This is eligible for the 0 % CT rate.

8. Non-Qualifying Income:

It’s the Income that falls outside the “qualifying income” definition. This means it is subject to the standard corporate tax rate.

9. Taxable income:

This is the profit of a taxable person in a tax period after making the required adjustments under the law. On this profit, the corporate tax will be calculated.

10. Exempt income:

Income that is excluded from tax under the law. For example, we can say that certain dividends, capital gains, and incomes of non-resident persons under specific conditions may be exempt.

11. Taxable threshold:

It is the threshold, AED 375,000. Up to this the 0% rate applies. But remember, if your income crosses this, then it’ll trigger the 9% tax rate.

12. Tax return:

It’s the formal filing to the FTA for a given tax period. You must report your taxable income and calculate the tax liability. Also, it’s crucial to remember that the return must be filed within nine months from the end of the tax period.

13. Tax residency:

Mainly, for a company, this term means being incorporated in the UAE or “effectively managed and controlled” in the UAE. It makes the company a “resident person” for tax purposes.

14. Non-resident person:

A person (typically a juridical entity) that is not a resident person but derives UAE-source income or has a permanent establishment in the country.

15. Resident person:

It means a company which is incorporated or recognised under UAE legislation. Hence, it is within the scope of corporate tax.

16. Permanent Establishment (PE):

This term PE, means a fixed place of business in the UAE through which non-residents can carry out their businesses.

17. Small business relief:

It’s basically a program by the UAE government. It allows eligible businesses with revenue below specified limits to elect for simplified treatment for the period.

18. Transfer pricing:

Transfer pricing means the rules and documentation around transactions between related parties. This ensures market-price terms and also makes sure that no one can cause profit shifting and evade taxes.

19. Arm’s length principle:

Did you know that the Arm’s length principle is actually the basis of transfer pricing? It means transactions between related or connected persons should reflect everything that would be agreed between independent parties.

20. Deductible expenses:

Generally, expenses like salaries, officerent, travel cost, etc, are not capital in nature and are deductible when calculating taxable income.

21. Non-deductible expenses:

These may include fines, penalties, or expenses incurred to derive exempt income. Also, entertainment expenses may be restricted (beyond the permitted limit).

22. Withholding tax:

The UAE law allows for a 0% withholding tax rate on cross-border payments at present.

23. Tax group:

This tax grouping regime allows more than one business to apply as a single taxable person where they meet conditions (e.g., common parent ownership, same financial year) so that intra-group transfers are disregarded and losses may be set off.

24. Business activity code:

It’s the classification code assigned to the business activity of the taxpayer under the CT regime (via FTA portal) while registering. So the activity can be categorised properly.

25. Tax registration number (TRN):

After you’re done with the registration process, the FTA will assign a unique number, called TRN, for corporate tax. Think of the TRN as your corporate tax identity in the UAE, because it's essential for filing, correspondence, and compliance.

Tips to put this into practice

Once you’re clear on the language, start by mapping your business:

• Confirm if you are a “resident person” or a “non-resident person”.

• Always determine your tax period and calculate taxable income, including all revenues, and make adjustments as per the law (deductible vs non-deductible).

• Don’t forget to check if your taxable income is within the AED 375,000 or not. It’ll help you to benefit from a 0 % rate for that portion.

• It’s necessary to keep your TRN and business activity code updated and maintain audit-ready records.

From now on, whenever you hear these words, you’ll know exactly what they mean in the UAE context. Ultimately, using these correct terms at the right time will help you to avoid late or wrong submissions.