Key Highlights of Corporate Tax in UAE
Overview of Corporate Tax
- A type of direct tax imposed on the net income or profit that corporations and other entities make from their operations is called corporate tax. Federe-Law No. 60 of 2023 Amending Certain Provisions of the Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses governs corporate taxation.
- Starting on or after June 1, 2023, businesses will be liable to UAE Corporate Tax from the start of their first fiscal year.
Why is the UAE imposing Corporate Tax?
- It is anticipated that a competitive corporate tax system built on worldwide best practices will strengthen the United Arab Emirates’ standing as a preeminent international center for trade and investment and hasten the country’s growth and transformation in order to meet its strategic goals.
- The UAE’s commitment to upholding international norms for tax transparency and avoiding unfair tax practices is further reaffirmed by the introduction of a corporate tax framework.
The Purpose of Corporate Tax
Through implementing the CT, the UAE hopes to:
• Strengthen its standing as a preeminent international center for trade and investment
• Quicken its growth and change in order to meet its strategic goals.
• Reiterate its dedication to avoiding detrimental tax tactics and upholding international standards for tax transparency.
Area
CT will be relevant for:
• Every company and person operating in the United Arab Emirates has a commercial license
• Businesses operating in free zones (The CT incentives now provided to free zone companies who adhere to all legal requirements and refrain from conducting business from establishments on the UAE mainland will remain honored by the UAE CT regime.)
• Foreign companies and persons, but only if they regularly or consistently conduct business or trade in the United Arab Emirates.
• Financial transactions.
• Companies that manage real estate and carry out development, construction, agency, and brokerage operations.
Rate of Corporate Taxation
- 0% (zero percent) on the amount of taxable income up to AED 375,000 that is issued by the Cabinet on the Minister of Finance’s recommendation.
- 9% (nine percent) on any amount over AED 375,000 in taxable income.
- A distinct tax rate (yet to be determined) for major multinational corporations that satisfy particular standards established in relation to ‘Pillar two’ of the OECD Base Erosion and Profit Shifting Project.
Exemption from Corporate Taxation
The guidelines governing corporation tax exemptions.
- Interest and additional money received by a person from savings accounts or bank deposits
- Individuals investing in real estate in their individual capacities
- A UAE business’s qualified shareholdings will be free from capital gains and dividend tax (CT).
- Dividends, capital gains, interest, royalties, and other investment returns received by a foreign investor
- Individuals’ dividends, capital gains, and other income from holding shares or other securities in their individual capacity.
- Companies that extract natural resources are not liable to the Connecticut corporate tax since they are still subject to the corporate tax that is currently in effect at the Emirate level.
- If the requirements are satisfied, qualifying intra-group transactions and reorganizations won’t be subject to CT.
- A person’s pay and other sources of income from employment, whether they originate from the public or private sector
Procedure for Preparing UAE Corporate Tax
As a first step in determining the implications of the UAE Corporate Tax policy for your company, you should:
- Visit the websites of the Federal Tax Authority and the Ministry of Finance to read the Corporate Tax Law, its implementing decisions, and the accompanying documentation.
- Make use of the information at your disposal to ascertain whether UAE Corporate Tax will apply to your company and, if so, when.
- Recognize what the Corporate Tax Law requires of your company, such as, for instance:
- If your company must file for corporate tax in the United Arab Emirates.
2. What is your company’s tax period?
3. The deadline for filing a UAE Corporate Tax Return by your company.
4. Which decisions or filings your company should or can make in order to apply for UAE corporate tax.
5. How UAE Corporate Tax may affect the responsibilities and liabilities of your company under agreements with suppliers and consumers.
6. The financial data and documentation that your company must maintain in order to comply with UAE Corporate Tax laws.
7. For further details and recommendations about the UAE Corporate Tax regime, visit the websites of the Federal Tax Authority and the Ministry of Finance on a regular basis.