Effective 1 June 2023, under the new federal corporate tax regime, resident companies in the UAE are taxed on their worldwide income, i.e., income derived from the UAE or from outside the UAE. However, with respect to income derived from a foreign permanent establishment, resident companies can make an election to exclude the income and related expenditures of their foreign permanent establishment in determining their taxable income (see Sec. 4.2.).

Previously, the UAE had a territorial tax system. Only domestic sourced income and capital gains were taxed (at least in theory, in reality generally untaxed).