Federal Decree Law 47 of 2022 explained for UAE businesses

What is Federal Decree Law 47 of 2022?

Federal Decree Law 47 of 2022 is the UAE corporate tax law. It introduced a federal tax on business profits for the first time, effective for financial years starting on or after June 1, 2023. The law sets the headline rate at 9% on taxable income above AED 375,000, with 0% below that threshold.

This article breaks down Federal Decree Law 47 of 2022 in plain English for UAE business owners and finance teams. You will see who the law covers, the rates that apply, the main exemptions, and how filings work. For the wider context, see our hub on UAE Corporate Tax.

The law is the cornerstone of the UAE federal corporate tax regime. It is published by the Ministry of Finance (MoF) and administered by the Federal Tax Authority (FTA). You can read the official text on the Ministry of Finance website.

Why the UAE introduced corporate tax

The UAE introduced corporate tax to align with global tax standards and reduce reliance on oil revenue. The move also supports the OECD-led international tax framework, including the 15% global minimum tax for large multinational groups.

Federal Decree Law 47 of 2022 keeps the UAE competitive. The 9% headline rate remains one of the lowest in the world. Small businesses earning up to AED 375,000 in taxable income pay 0%, which protects startups and small operators.

Key dates in the law's rollout

• December 9, 2022: Federal Decree Law 47 of 2022 published.
• June 1, 2023: Law takes effect for financial years starting on or after this date.
• January 1, 2025: Domestic Minimum Top-up Tax (DMTT) at 15% for large multinationals begins.

Who Federal Decree Law 47 of 2022 applies to

The law applies to most businesses operating in the UAE. This includes mainland companies, free zone entities, and individuals carrying on a business or business activity in the UAE. Foreign companies with a permanent establishment in the UAE also fall under the law.

For a full breakdown, read who pays corporate tax in UAE and our overview of what is UAE corporate tax.

Taxable persons under the law

• Resident juridical persons: UAE-incorporated companies, including LLCs, PJSCs, and free zone entities.
• Non-resident juridical persons: Foreign companies with a UAE permanent establishment or UAE-sourced income.
• Natural persons: Individuals running a business in the UAE with annual turnover above AED 1,000,000.

Exempt persons

The law lists categories of exempt persons. These include UAE government entities, government-controlled entities on a Cabinet list, qualifying investment funds, qualifying public benefit entities, and certain pension and social security funds. Extractive and non-extractive natural resource businesses remain taxed at the Emirate level, not federally.

UAE corporate tax rates under the law

Federal Decree Law 47 of 2022 sets a tiered rate structure. The rates depend on the type of taxpayer and the amount of taxable income. For the full schedule, see UAE Corporate Tax Rates.

The 0% small business band

The 0% rate on the first AED 375,000 of taxable income protects small operators. A separate Small Business Relief is also available for businesses with revenue up to AED 3 million, effective through the end of 2026. Read more on the UAE corporate tax 9 percent threshold.

The 15% Pillar Two top-up

The 15% Domestic Minimum Top-up Tax applies to large multinational groups with consolidated global revenue of EUR 750 million or more. It aligns the UAE with the OECD Pillar Two framework. See UAE corporate tax 15 percent Pillar 2 for details.

Free zone treatment under the law

The law preserves free zone tax incentives, but only for a Qualifying Free Zone Person (QFZP). A QFZP must meet conditions on substance, qualifying income, transfer pricing, and audited financial statements. Qualifying income is taxed at 0%. Non-qualifying income is taxed at 9%.

If a free zone entity fails the QFZP test, it loses the 0% rate for the current period and the next four tax periods. The Ministerial Decisions issued under the law define qualifying activities and excluded activities in detail.

Taxable income and deductions

Taxable income starts with the accounting net profit prepared under IFRS or another accepted standard. The law then requires specific adjustments. These include adding back non-deductible expenses and removing exempt income such as qualifying dividends and capital gains under the Participation Exemption.

Common adjustments

• Add back 50% of entertainment expenses.
• Disallow fines and penalties that are not contractual.
• Apply the 30% EBITDA cap on net interest expense (general interest deduction limitation rule).
• Remove exempt dividends from UAE and qualifying foreign participations.
• Apply transfer pricing rules to related party transactions on an arm's length basis.

Tax losses

The law lets businesses carry forward tax losses indefinitely. Losses can offset up to 75% of taxable income in a future period. Conditions apply on continuity of ownership and business activity.

Registration, filing, and payment

Every taxable person must register with the Federal Tax Authority and obtain a Corporate Tax Registration Number. Registration is required even if the business expects to pay 0%. Exempt persons may also need to register, depending on category.

Filing deadlines

Corporate tax returns are due within 9 months of the end of the relevant financial year. Payment is due by the same deadline. There is no system of advance or provisional payments under the current law.

Record keeping

Businesses must keep records and supporting documents for 7 years after the end of the relevant tax period. This includes financial statements, transfer pricing documentation, and supporting invoices.

How the law connects to VAT and e-invoicing

Federal Decree Law 47 of 2022 sits alongside the UAE VAT regime under Federal Decree-Law 8 of 2017 and the UAE e-invoicing framework. VAT is charged at 5% with a mandatory registration threshold of AED 375,000 in taxable supplies. The voluntary threshold is AED 187,500.

UAE e-invoicing uses the Peppol 5-corner Decentralized Continuous Transaction Control and Exchange (DCTCE) model in PINT AE format. Phase 1 go-live is January 1, 2027 for businesses with revenue of AED 50 million or more. The same accurate financial data supports both VAT compliance and corporate tax filings under Federal Decree Law 47 of 2022.

For more on the legal text and amendments, see UAE Corporate Tax Law. You can also review official guidance on the Federal Tax Authority website.

Penalties and compliance risk

The Federal Tax Authority can issue administrative penalties for late registration, late filing, late payment, and inaccurate returns. Penalty amounts are set by Cabinet Decisions issued under the Tax Procedures Law.

Common compliance gaps for UAE businesses include missing the registration window, weak transfer pricing files, and poor documentation for free zone qualifying income. Clean accounting records and structured invoicing make audits faster and reduce risk.

Practical checklist for UAE businesses

1. Confirm your tax period based on your financial year.
2. Register for corporate tax with the FTA and obtain your Tax Registration Number (TRN).
3. Review whether you qualify as a Qualifying Free Zone Person (QFZP).
4. Map related party transactions and prepare transfer pricing documentation.
5. Update your chart of accounts to track adjustments such as entertainment and interest.
6. Align VAT, e-invoicing, and corporate tax records on one accounting system.
7. Diarize the 9 month filing and payment deadline.
8. Keep all records for 7 years.

For the wider regime, return to our UAE Corporate Tax hub or read our deep dive on the UAE corporate tax law.

Closing

EInvoice Direct keeps your e-invoicing and tax data clean, which makes both VAT and corporate tax filings easier. An accredited service provider (ASP) is included with the software at no extra charge. To get UAE e-invoicing pricing, contact our team.