The UAE has implemented a comprehensive federal tax system that is applicable to all businesses and commercial activities across the seven emirates. Despite this broad application, certain exceptions exist:

1. Businesses in Natural Resource Extraction: Entities engaged in the extraction of natural resources will remain subject to the tax decrees issued by their respective emirates.

2. Individual Income: Individuals earning income in a personal capacity, such as salary or investment income, are exempt from the tax, provided the income-generating activity does not require a commercial license.

3. Free Trade Zone Businesses: Businesses registered in Free Trade Zones are exempt, provided they adhere to all regulatory requirements and do not engage in transactions with the Mainland UAE.

An intriguing development is the inclusion of the foreign banking sector, previously operating under Emirate-level bank tax decrees, into the purview of the UAE Federal Tax Law. The implications of this shift for both branches of foreign banks, necessitating adherence to the new law, and for local banks, now subject to corporate tax akin to other businesses, will be communicated in due course. This marks a significant transition for the banking sector in aligning with the broader federal taxation framework.

The UAE Corporate Tax (CT) regime introduces a structured tier system comprising three distinct rates: 

1. Zero Rate for Profits up to AED 375,000:** Annual taxable profits falling below AED 375,000 will be subject to a zero percent tax rate.

2. 9% Rate for Profits Exceeding AED 375,000:** Profits surpassing AED 375,000 in annual taxable income will be subject to a 9% tax rate.

3. Special Rates for Multinational Enterprises (MNEs) under BEPS 2.0:** Multinational enterprises falling within the scope of Pillar 2 of the BEPS 2.0 framework, with consolidated global revenues exceeding AED 3.15 billion, will be subject to specific rates in accordance with OECD Base Erosion and Profit-Sharing rules.

It is important to note that taxable profits are computed based on accounting profits, with certain adjustments applied to align with the regulatory framework. This tiered system represents a nuanced approach, catering to businesses of varying scales and international profiles under the UAE’s evolving tax landscape.