Professional services firms (consultancies, law firms, accounting firms) incorporated in the UAE pay CT at 9% on taxable income above AED 375,000. Key CT issues: partner drawings are only deductible if structured as arm’s-length salaries; SBR applies if revenue ≤ AED 3M; intra-group service fees require transfer pricing documentation.
Which professional services firms are subject to UAE CT?
Any UAE-incorporated entity providing professional services — management consulting, legal, accounting, financial advisory, IT services, engineering, marketing — is subject to UAE CT from its first financial year starting on or after 1 June 2023.
This includes sole traders with trade licences earning over AED 1 million in business income annually. A freelance consultant who operates through a UAE trade licence and bills AED 1.5 million per year is subject to UAE CT.
Partner drawings and CT — the deductibility question
In a UAE partnership or jointly owned professional firm, partner drawings (profit distributions) are not automatically deductible for CT purposes. Unlike a salary paid to an employee, a partner’s share of profits is treated as a share of post-tax income — not a business expense.
However, if partners are also employees of the firm and receive a market-rate salary in addition to their profit share, that salary component is a deductible expense for CT. The key: the salary must be at arm’s length (comparable to what an unrelated person would earn for the same role). Above-market compensation to owner-partners will be partially disallowed.
A professional firm with two founding partners who draw AED 1.5 million each per year should structure compensation as a market-rate salary (e.g., AED 800K each, benchmarked to comparable senior professionals) plus a profit distribution. The AED 800K salary is deductible; the distribution is not. This reduces the firm’s taxable income by AED 1.6 million vs full draw treatment.
SBR eligibility for small practices
Many small consultancies, boutique law firms, and specialist advisory practices have revenue under AED 3 million. If so, they can elect Small Business Relief annually (0% CT) for tax periods ending on or before 31 December 2029, the end date set when Ministerial Decision No. 131 of 2026 extended the relief.
SBR is particularly valuable for professional services firms where most of the revenue is consumed by partner compensation — the taxable profit may be modest, but even 9% on AED 200,000 is AED 11,250 that SBR eliminates for eligible firms.
Intra-group fees and transfer pricing
Professional services groups that share staff, IP, or back-office functions between UAE entities and non-UAE entities must price those arrangements at arm’s length. Common examples: a UAE head office charging subsidiary offices for use of a methodology, software platform, or brand.
For professional services firms, the Cost Plus method is most commonly used for shared services — cost of providing the service to the related party plus an appropriate mark-up (typically 5–15% for support functions). The TP Disclosure Form must be filed with the CT 300 if any related-party service transactions exist.
Client entertainment — 50% cap in professional services
Professional services firms often have significant client entertainment: client dinners, conference hospitality, event sponsorships. These are deductible at only 50% under UAE CT. A firm spending AED 200,000 per year on client entertainment can only claim AED 100,000 as a CT deduction — the other AED 100,000 is an add-back in the CT computation.
Professional services firm navigating UAE CT?
We advise on partner compensation structuring, SBR eligibility, TP on intra-group fees, and prepare the CT 300 for professional services entities. Fixed scope.
Frequently asked questions
Do consultants and law firms pay UAE Corporate Tax?
Yes. Any UAE-incorporated professional services entity pays CT at 9% on taxable income above AED 375,000. Individual freelancers with a trade licence pay CT only if business income exceeds AED 1 million.
Are partner drawings deductible for UAE CT?
Profit distributions to partners are not deductible — they are treated as post-tax income. But market-rate salaries paid to partners as employees are deductible. Structure partner compensation as salary + profit share to optimise CT.
Can a consulting firm elect Small Business Relief?
Yes, if revenue is ≤ AED 3 million in the current and all prior CT periods. SBR gives 0% effective CT and is available for tax periods ending on or before 31 December 2029, after its extension by Ministerial Decision No. 131 of 2026.
Do professional services firms need transfer pricing documentation?
Yes, if they have related-party transactions (intra-group fees, shared services, intercompany loans). The TP Disclosure Form must be filed with the CT 300, and Local File documentation is required if related-party transactions exceed AED 40 million.
Are client entertainment expenses deductible for UAE CT?
50% deductible. Business meals, client hospitality, and event sponsorships are subject to the 50% entertainment cap. Keep attendee records to distinguish fully deductible staff events from 50% client entertainment.
What CT records must a professional services firm keep?
All financial statements, CT returns, invoices (issued and received), client contracts, partner compensation agreements, and intra-group service agreements — for 5 years from the end of the relevant tax period.
Guides for your industry
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Browse: UAE Bookkeeping and Accounting Guides by Industry · UAE Corporate Tax Filing Guides by Industry