Definition

Taxable Income is the portion of a business’s profit that is subject to UAE Corporate Tax. It is calculated by adjusting accounting profits (from financial statements) to include or exclude items as specified under the Corporate Tax Law.

Key points

• Starting point: Net profit (or loss) in the financial statements, prepared according to IFRS.
• Adjustments include:
• – Non-deductible expenses (e.g., fines, entertainment).
• – Exempt income (e.g., dividends from qualifying shareholdings).
• – Reliefs and incentives (e.g., Small Business Relief, Foreign Tax Credit).
• Standard rate: 9% on taxable income above AED 375,000.
• Must be reported annually in the Corporate Tax Return filed via EmaraTax.

Practical example

A Dubai LLC reports net profit of AED 1,200,000. After deducting exempt dividend income of AED 200,000 and adding back AED 50,000 of non-deductible expenses, the taxable income is AED 1,050,000. Corporate tax due = (1,050,000 – 375,000) × 9% = AED 60,750.

Why it matters

Understanding taxable income is essential for accurate corporate tax planning, reducing risks of underpayment, and ensuring full compliance with UAE tax law.