UAE Corporate Tax & VAT

Why B? And why not the others?

Correct answer: B. AED 11,250, applying 0% to the first AED 375,000 and 9% to the remaining AED 125,000

Article 3 of Federal Decree-Law No. 47 of 2022 sets a two-tier Corporate Tax rate: 0% on taxable income up to AED 375,000, and 9% on taxable income above that threshold. On AED 500,000, the first AED 375,000 is taxed at 0% and only the remaining AED 125,000 is taxed at 9%, giving AED 11,250. Option A wrongly applies the 9% rate to the entire amount, ignoring that the 0% band is a genuine bracket in the rate schedule, not a conditional exemption. Option C invents a 5% Corporate Tax rate by confusing it with the unrelated 5% VAT rate, which taxes supplies rather than income. Option D confuses this scenario with the separate AED 1,000,000 turnover threshold that determines whether a natural person's business activity is in scope of Corporate Tax at all; it has no bearing on a juridical person's tax liability once already a taxable person.

Source: UAE Federal Decree-Law No. 47 of 2022, Article 3 (Corporate Tax rate)

Why A? And why not the others?

Correct answer: A. The taxable person is treated as if it derived no taxable income for the tax period and has no Corporate Tax liability

Article 21 lets a resident taxable person whose revenue in the current and previous tax period does not exceed AED 3,000,000 elect Small Business Relief, and Ministerial Decision No. 73 of 2023 confirms that an effective election means the taxable person is treated as if it derived no taxable income for that tax period, eliminating Corporate Tax liability for it. Option B is wrong because the relief is elective, not automatic — the taxable person must actively choose it on their return. Option C is wrong because the relief operates on taxable income itself, not merely on registration formalities, so a valid election removes the liability entirely rather than leaving a 9%-band charge in place. Option D is wrong because eligibility is reassessed each tax period based on that period's and the prior period's actual revenue; being close to the AED 3,000,000 ceiling does not disqualify a taxable person unless revenue actually exceeds it.

Source: UAE Federal Decree-Law No. 47 of 2022, Article 21; Ministerial Decision No. 73 of 2023 (Small Business Relief)

Why A? And why not the others?

Correct answer: A. Only the AED 1.2 million business turnover, since the AED 1,000,000 threshold is measured on licensed business or business activity turnover, and employment income is excluded from scope

Cabinet Decision No. 49 of 2023 provides that a natural person conducting business or business activity in the UAE is only subject to Corporate Tax where the total turnover from that business or business activity exceeds AED 1,000,000 within a Gregorian calendar year, and it explicitly excludes employment income, personal investment income, and real estate investment income (where no licence is required) from that turnover calculation. Here the AED 1.2 million licensed consulting turnover alone exceeds the threshold, bringing the individual into scope. Option B is wrong because it wrongly folds excluded employment income into the turnover test. Option C is wrong because employment income is expressly carved out of Corporate Tax scope for natural persons and is never the basis for the threshold. Option D is wrong because natural persons conducting a business or business activity above the AED 1,000,000 turnover threshold are explicitly brought into scope as Taxable Persons.

Source: UAE Cabinet Decision No. 49 of 2023 (Taxation of Natural Persons under Corporate Tax Law)

Why A? And why not the others?

Correct answer: A. No, because AED 3.5 million is below both the AED 5 million cap and 5% of AED 80 million (AED 4 million), and the de minimis test uses whichever of those two figures is lower

The de minimis requirement for Qualifying Free Zone Persons caps Non-Qualifying Revenue at the lower of AED 5 million or 5% of total revenue for the tax period. Here 5% of AED 80 million is AED 4 million, which is lower than the flat AED 5 million cap, so the applicable threshold is AED 4 million; AED 3.5 million of Non-Qualifying Revenue is below that, so the test is passed and Qualifying Free Zone Person status is retained. Option B is wrong because the rule is a quantified de minimis threshold, not a zero-tolerance rule. Option C is wrong because the test's threshold is calculated from each entity's own revenue figures and applies regardless of the entity's total revenue size. Option D is wrong because there is no flat AED 3 million cap in the de minimis rule; the actual comparison is between AED 5 million and a 5% calculation.

Source: UAE Federal Decree-Law No. 47 of 2022, Article 18 and Ministerial Decision No. 265 of 2023 (Qualifying Free Zone Person de minimis requirement)

Why A? And why not the others?

Correct answer: A. Parent Co. and Subsidiary Co. must jointly apply to the Federal Tax Authority, which must approve the Tax Group before the members are treated as a single Taxable Person

Article 40 requires that, in addition to meeting the ownership (at least 95% of share capital, voting rights, and entitlement to profits and net assets), residency, financial year, and accounting standard conditions, the parent and subsidiary must jointly apply to the Federal Tax Authority, which must approve the application before the Tax Group is treated as a single Taxable Person. Option B is wrong because approval by the Federal Tax Authority is a mandatory precondition, not an automatic consequence of meeting the ownership and residency tests. Option C is wrong because Article 40 Tax Groups consolidate Corporate Tax filing and liability, letting the parent file a single return on behalf of the group; VAT grouping is a separate regime under UAE VAT Law. Option D is wrong because the 95% figure is a minimum ownership threshold, not a ceiling — 96% ownership comfortably satisfies the condition and does not need to be reduced.

Source: UAE Federal Decree-Law No. 47 of 2022, Article 40 (Tax Group)

Why A? And why not the others?

Correct answer: A. Yes, because the AED 4 million acquisition-cost alternative to the 5% ownership test is met, and the holding-period, subject-to-tax, and asset tests are also satisfied

Article 23's Participation Exemption normally requires at least 5% ownership, but an ownership interest below 5% still qualifies if its acquisition cost is at least AED 4 million; here AED 4.5 million meets that alternative. The 18-month holding period exceeds the required 12 months, the subsidiary's 12% statutory rate is not lower than the UAE's 9% rate so the subject-to-tax test is met, and the asset test is also satisfied, so the dividend qualifies for exemption. Option B is wrong because Article 23 explicitly provides the AED 4 million acquisition-cost alternative precisely for interests below 5%. Option C is wrong because Small Business Relief is an unrelated, separate relief for small resident taxable persons and has no bearing on whether a Participating Interest qualifies for exemption. Option D is wrong because 12% is higher than, not lower than, the 9% UAE rate, so the subject-to-tax test is actually satisfied, not failed.

Source: UAE Federal Decree-Law No. 47 of 2022, Article 23 (Participation Exemption)

Why A? And why not the others?

Correct answer: A. AED 15 million (30% of the AED 50 million EBITDA), since the AED 12 million de minimis figure is a floor that does not reduce a higher EBITDA-based deduction capacity

Article 30's General Interest Deduction Limitation Rule allows a taxable person to deduct Net Interest Expenditure up to the greater of 30% of tax-adjusted EBITDA or AED 12 million for the tax period. Here 30% of AED 50 million EBITDA is AED 15 million, which is greater than the AED 12 million de minimis figure, so AED 15 million is deductible and the remaining AED 5 million is disallowed for the period (though it may be carried forward). Option B is wrong because the AED 12 million figure is a minimum safe-harbour amount that always remains deductible even without meeting the 30% test, not a ceiling that caps deductions once the 30%-of-EBITDA figure is higher. Option C is wrong because deductibility is capped at the greater of the two Article 30 figures, not simply by comparing total interest to total EBITDA. Option D is wrong because the 30% rate is applied to EBITDA, not to the Net Interest Expenditure itself.

Source: UAE Federal Decree-Law No. 47 of 2022, Article 30 (General Interest Deduction Limitation Rule)

Why A? And why not the others?

Correct answer: A. Yes, because the AED 200 million standalone revenue threshold is met on its own, independently of any Multinational Enterprise Group membership or the separate AED 3.15 billion consolidated-revenue test

Ministerial Decision No. 97 of 2023 requires a taxable person to maintain both a Master File and a Local File if either of two independent conditions is met: the taxable person's own revenue for the tax period is AED 200 million or more, or the taxable person is a constituent entity of a Multinational Enterprise Group with total consolidated group revenue of AED 3.15 billion or more. These are alternative triggers, so a standalone taxable person with AED 210 million of revenue meets the first condition on its own, with no need for group membership. Option B is wrong because it treats the AED 3.15 billion group test as the only trigger, ignoring the independent AED 200 million standalone-revenue trigger. Option C is wrong because the AED 200 million threshold specifically triggers the Master File and Local File obligation itself, in addition to the separate disclosure form required of all taxable persons with related-party transactions. Option D is wrong because the AED 200 million test is based on the taxable person's total revenue, not specifically on the value of related-party transactions.

Source: UAE Ministerial Decision No. 97 of 2023 (Transfer Pricing Documentation)

Why A? And why not the others?

Correct answer: A. The business must register for VAT within 30 days, because AED 400,000 exceeds the AED 375,000 mandatory registration threshold

Under UAE VAT Law, a business whose taxable supplies and imports exceed the AED 375,000 mandatory registration threshold over a rolling 12-month period (or expected in the next 30 days) must apply to register with the Federal Tax Authority within 30 days of becoming liable. AED 400,000 exceeds that threshold, so mandatory registration applies. Option B is wrong because it describes the separate AED 187,500 voluntary registration threshold, which is irrelevant once the mandatory threshold has already been exceeded. Option C is wrong because it confuses the unrelated AED 1,000,000 Corporate Tax turnover threshold for natural persons with the VAT registration threshold, which is a different tax with its own AED 375,000 test. Option D is wrong because the mandatory threshold is assessed on a rolling 12-month basis (or forward-looking 30-day projection), not only at a fixed annual date.

Source: UAE Federal Decree-Law No. 8 of 2017, Article 13 and Federal Tax Authority VAT registration guidance (mandatory registration threshold)

Why A? And why not the others?

Correct answer: A. The importing business applies the reverse charge mechanism, treating itself as having made a taxable supply to itself and self-accounting for output and input tax on the same VAT return

Article 48 provides that when a taxable person imports Concerned Goods or Concerned Services for business purposes, they are treated as making a taxable supply to themselves, making them responsible for accounting for the applicable output tax while simultaneously being able to recover it as input tax (subject to normal recovery rules) on the same VAT return, rather than the foreign supplier charging UAE VAT. Option B is wrong because non-resident suppliers with no UAE VAT registration do not charge UAE VAT directly; the obligation shifts to the UAE recipient precisely because the supplier is outside the UAE VAT system. Option C is wrong because the reverse charge exists specifically to ensure VAT is still accounted for on imports even though the foreign supplier is not registered. Option D is wrong because reverse-charge VAT is self-accounted on the VAT return, not paid in cash at the border, and it remains recoverable as input tax like any other input VAT, subject to the normal recovery conditions.

Source: UAE Federal Decree-Law No. 8 of 2017, Article 48 (Reverse Charge)

Why A? And why not the others?

Correct answer: A. Zero-rated, because the goods left the UAE within the 90-day limit and both official and commercial evidence of export were retained

UAE VAT Law zero-rates the export of goods to a destination outside the UAE and outside the GCC implementing states, provided the goods physically leave the UAE within 90 days of the date of supply and the supplier retains official evidence (the customs export document) and commercial evidence (such as an airway bill or bill of lading) of the export. Here both conditions are met, so the supply is zero-rated. Option B is wrong because zero-rating for exports applies to goods as well as services; the rules simply differ in their specific conditions. Option C is wrong because zero-rated supplies remain taxable supplies (taxed at 0%), letting the supplier recover related input tax, unlike an exempt supply. Option D is wrong because the 90-day departure window is a substantive condition, not a formality; missing it means the supply is taxed at the standard 5% rate even if export paperwork is later obtained.

Source: UAE Federal Decree-Law No. 8 of 2017, Article 45 and its Executive Regulation (zero-rating of exports of goods)

Why A? And why not the others?

Correct answer: A. Standard-rated at 5%, because the Designated Zone's 'outside the State' treatment applies to specified zone-to-zone transfers and exports, not to an ordinary mainland-to-zone domestic sale

A Designated Zone meeting the Executive Regulation's fencing, security, and Customs-control conditions is treated as outside the UAE for VAT purposes only for specified movements, such as certain zone-to-zone transfers of goods intended for resale and exports leaving the Designated Zone; an ordinary sale of goods from the UAE mainland into a Designated Zone is instead treated as a domestic supply and is standard-rated at 5%. Option B is wrong because physical location within a Designated Zone does not, by itself, convert a mainland sale into an export; the 'outside the State' treatment is conditional and movement-specific, not automatic for all goods present in the zone. Option C is wrong because Designated Zones are not blanket VAT-free areas; the special treatment is limited to defined circumstances, and ordinary mainland sales into the zone fall outside that treatment. Option D is wrong because Designated Zone supplies are not part of the exemption category that covers bare land and residential leases, which is an entirely separate and unrelated VAT exemption.

Source: UAE Federal Decree-Law No. 8 of 2017, Article 51 and its Executive Regulation (Designated Zones)