All UAE-sourced employment income, including bonuses, is tax-free.

Explanation/Discussion:

Excuse me, but is my bonus taxable under UAE’s new corporate tax law?!! The short answer is no, it is tax-free. All UAE-sourced employment income including bonuses no matter how much you make is not taxable in the UAE.

Employees are not required to register nor to pay Corporate Tax on their Wages. Whatever you make from your employment in any given Gregorian calendar year, January-December, be it salary, allowances, benefits, and bonuses of any amount is not taxable.

Limitation:

Wages is a term defined in the Corporate Tax Law. It includes amounts payable in cash as well as payable-in-kind. The definition of Wages doesn’t specify what is meant by payment-in-kind. Are stock-based compensation (“SBCs”) arrangements, a type of option to buy stock at a future point in time given to employees by the company, part of it? What about Equity Grants or Employee Stock Ownership Plans (“ESOPs”)?

Where unspecified situations exist, they should be checked with the Federal Tax Authority (“FTA”) – are these considered employment / Wage income or not?

Legislative References:

1. Federal Decree-Law No. 47 of 2022, Article 11, Clause 6

2. Cabinet Decision No. 49 of 2023

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