UAE Tax & Accounting Glossary
Plain-English definitions of key terms used in UAE tax, accounting, audit, and business advisory — from Corporate Tax and VAT to IFRS and free zone rules.
A
- Arm's Length Principle
- The requirement under UAE Transfer Pricing rules (Article 34 of the Corporate Tax Law) that transactions between related parties be priced as if conducted between unrelated parties under similar conditions. The FTA uses this principle to assess whether profits have been artificially shifted between related entities.
- Audit
- An independent examination of a company's financial statements and records by a licensed auditor to confirm they present a true and fair view in accordance with the applicable accounting framework (usually IFRS in the UAE). Mandatory for public joint-stock companies, banks, and certain free zone entities in the UAE.
B
- Base Erosion and Profit Shifting (BEPS)
- An OECD framework addressing tax planning strategies that exploit gaps in tax rules to shift profits to low- or no-tax locations. The UAE's Corporate Tax Law incorporates several BEPS measures including transfer pricing rules, the General Anti-Abuse Rule (GAAR), and country-by-country reporting.
- Bookkeeping
- The systematic recording of a company's financial transactions (invoices, receipts, bank statements, payroll) in an accounting system. Bookkeeping is a subset of accounting — it covers the recording function, while accounting also includes analysis, reporting, and compliance.
C
- Cabinet Decision
- A form of UAE legislation issued by the Cabinet of Ministers, typically to implement or clarify provisions of Federal Laws and Decrees. Many VAT and Corporate Tax regulations (including tax group rules, transfer pricing thresholds, and small business relief conditions) are issued as Cabinet Decisions.
- Corporate Tax (CT)
- A federal tax on the taxable income of UAE businesses at a rate of 9% on profits above AED 375,000 per financial year, introduced by Federal Decree-Law No. 47 of 2022. Effective for financial years starting on or after 1 June 2023. Free zone companies meeting Qualifying Free Zone Person (QFZP) conditions may benefit from a 0% rate on qualifying income.
D
- DIFC (Dubai International Financial Centre)
- A financial free zone in Dubai with its own civil and commercial laws, courts, and regulatory body (DFSA). Companies incorporated in DIFC operate under an English common law framework and are regulated by the Dubai Financial Services Authority (DFSA), separate from mainland UAE regulation.
E
- Economic Substance Regulations (ESR)
- UAE regulations (Cabinet Decision 57 of 2020) requiring UAE onshore and free zone companies that earn income from certain 'Relevant Activities' (banking, insurance, fund management, intellectual property, holding companies, etc.) to demonstrate adequate economic substance in the UAE.
- Emirate
- One of the seven constituent territories of the United Arab Emirates — Abu Dhabi, Dubai, Sharjah, Ajman, Ras Al Khaimah, Fujairah, and Umm Al Quwain. Each emirate has its own government and can issue separate business licenses and regulations in addition to federal law.
- Excise Tax
- A UAE federal tax on specific goods deemed harmful to health or the environment — tobacco products (100%), energy drinks (100%), carbonated drinks (50%), and sweetened drinks (50%). Introduced in 2017 under Federal Decree-Law No. 7 of 2017. Administered by the FTA.
F
- Federal Decree-Law
- A form of primary legislation in the UAE issued by the President (as Supreme Commander of the Armed Forces) upon approval by the Federal Supreme Council. The UAE VAT Law (Federal Decree-Law No. 8 of 2017) and Corporate Tax Law (Federal Decree-Law No. 47 of 2022) are both Federal Decree-Laws.
- Federal Tax Authority (FTA)
- The UAE federal government body responsible for administering, collecting, and enforcing federal taxes — currently VAT, Excise Tax, and Corporate Tax. The FTA maintains registers of tax registrants and licensed tax agents. Official website: tax.gov.ae
- Free Zone
- A designated area within a UAE emirate with its own licensing authority, offering benefits such as 100% foreign ownership, 0% import/export duties, and specific tax treatment. There are over 40 free zones in the UAE including JAFZA, DAFZA, DMCC, DIFC, ADGM, RAKEZ, and Meydan.
G
- GAAR (General Anti-Abuse Rule)
- A provision in the UAE Corporate Tax Law (Article 50) that allows the FTA to disregard or re-characterise transactions or arrangements that lack commercial substance and are primarily designed to obtain a tax advantage. The GAAR targets artificial or abusive tax arrangements.
I
- IFRS (International Financial Reporting Standards)
- The global accounting standards framework issued by the IASB, required for financial reporting by UAE public companies and commonly adopted by larger UAE private businesses. Free zone entities often require IFRS-compliant financial statements. Key standards relevant to the UAE include IFRS 9 (financial instruments), IFRS 15 (revenue), and IFRS 16 (leases).
- Input Tax
- VAT paid by a business on its purchases and expenses. In the UAE VAT system, VAT-registered businesses can reclaim input tax paid on business-related costs against the output tax (VAT charged to customers) they collect, with the net amount paid to or refunded by the FTA.
M
- MoE (Ministry of Economy)
- The UAE federal ministry responsible for economic policy, trade regulations, and the licensing of certain professions — including auditors and certified accountants practising on the UAE mainland. The MoE maintains registers of licensed auditing firms and external auditors.
- MOHRE (Ministry of Human Resources and Emiratisation)
- The UAE federal ministry governing employment relationships for mainland UAE businesses, including labour contracts, work permits, Emiratisation quotas (Nafis programme), and employee rights under the UAE Labour Law (Federal Decree-Law No. 33 of 2021).
O
- Output Tax
- VAT charged by a UAE VAT-registered business on its taxable supplies (sales and services) at the standard rate of 5% or zero rate of 0%. Businesses collect output tax from customers and remit it to the FTA after deducting eligible input tax.
P
- Pillar Two (Global Minimum Tax)
- The OECD's global minimum tax framework (15% minimum effective tax rate for large multinationals with revenue above EUR 750 million). The UAE announced implementation of Pillar Two Qualified Domestic Minimum Top-up Tax (QDMTT) effective from financial years starting on or after 1 January 2025.
Q
- Qualifying Free Zone Person (QFZP)
- A free zone entity that meets specific conditions under the UAE Corporate Tax Law to benefit from a 0% Corporate Tax rate on qualifying income. Conditions include maintaining adequate economic substance, deriving income from qualifying activities, and meeting the de minimis non-qualifying income threshold.
R
- Related Party
- Under the UAE Corporate Tax Law, related parties include persons with 50%+ ownership or control relationships, family members of natural person taxpayers, and entities that share a common controlling owner. Transactions between related parties must comply with the arm's length principle.
S
- Small Business Relief
- A UAE Corporate Tax relief available to resident juridical persons (and eligible natural persons) with revenue of AED 3 million or below per tax period, allowing them to be treated as having no taxable income. Available for tax periods ending on or before 31 December 2026 (Cabinet Decision No. 73 of 2023).
T
- Tax Agent (FTA-Registered)
- A person or firm registered with the FTA to act on behalf of taxable persons in UAE tax matters — submitting returns, communicating with the FTA, and representing clients in tax disputes. Only FTA-registered tax agents can legally represent UAE businesses before the FTA.
- Tax Group
- A group of UAE resident juridical persons under common ownership (95%+) that elect to be treated as a single taxable entity for Corporate Tax purposes, filing a single consolidated return. Intra-group transactions within a tax group are generally ignored for CT purposes.
- Tax Period
- The accounting period for which a UAE Corporate Tax return must be filed — typically 12 months, aligned with the company's financial year. The first tax period begins on the first day of the company's financial year starting on or after 1 June 2023.
- Transfer Pricing
- Rules governing the pricing of transactions between related parties under the UAE Corporate Tax Law. UAE businesses must price related-party transactions at arm's length and maintain contemporaneous documentation (a Master File and Local File) if they exceed specified thresholds set by Cabinet Decision.
- Troncmaster / Payroll Management
- In the UAE hospitality and service sector, the management of service charge and gratuity distribution among employees. UAE employers are required to comply with Wage Protection System (WPS) requirements for payroll, processing salaries through approved banks or exchange houses.
V
- VAT (Value Added Tax)
- A 5% consumption tax applied to most goods and services in the UAE, introduced on 1 January 2018 under Federal Decree-Law No. 8 of 2017. Businesses with taxable supplies exceeding AED 375,000 per year must register for VAT with the FTA. Certain supplies are zero-rated (exports, international transport, certain healthcare and education) or exempt (bare land, residential property).
W
- Wage Protection System (WPS)
- A UAE government electronic salary transfer system mandating that mainland businesses pay employee wages through approved banks, exchange houses, or financial institutions by a specified date each month. Administered by MOHRE. Non-compliance results in fines and potential suspension of new work permit applications.
- Withholding Tax
- Under the UAE Corporate Tax Law, UAE businesses are not required to withhold tax on payments to non-residents, as the UAE currently applies a 0% withholding tax rate. However, the law reserves the right to impose withholding tax by Cabinet Decision in the future.
Z
- Zero-Rated Supply (VAT)
- A taxable supply subject to VAT at 0% — the business charges 0% VAT but can still reclaim input tax on related costs. UAE zero-rated supplies include exports of goods and services, international passenger transport, certain healthcare services, educational services, and investment-grade precious metals.
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