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All you need to know about Corporate Tax in UAE

The UAE will introduce a federal Corporate Tax on business profits effective for financial years starting on or after 1 June 2023. The UAE Corporate Tax regime has been designed to incorporate best practices globally and minimize the compliance burden for UAE businesses. Know More..

With a standard statutory tax rate of 9% and a 0% tax rate for taxable profits up to AED 375,000 to support small businesses and startups, the UAE Corporate Tax regime will be amongst the most competitive in the world.

On 26 July 2021, the Ministry of Finance issued an official statement confirming the UAE’s support of the global minimum effective tax rate as proposed under “Pillar Two” of the OECD Base Erosion and Profit Shifting project. The introduction of a UAE Corporate Tax regime will provide a basis for the UAE to execute its support by applying a different Corporate Tax rate to large multinationals that meet specific criteria set with reference to the above initiative.

Businesses will have ample time to prepare for the introduction of Corporate Tax, and further information on the UAE Corporate Tax regime will be provided towards the middle of 2022 to help businesses get ready and be fully compliant.

ALL YOU NEED TO TO KNOW ABOUT THE NEW CORPORATE TAX IN UAE

FAQs

Corporate Tax is a form of direct tax levied on the net income or profit of corporations and other businesses.

Corporate Tax is sometimes also referred to as “Corporate Income Tax” or “Business Profits Tax” in other jurisdictions.

A competitive CT regime based on international best practices will cement the UAE’s position as a leading global hub for business and investment, and accelerate the UAE’s development and transformation to achieve its strategic objectives

Introducing a CT regime reaffirms the UAE’s commitment to meeting international standards for tax transparency and preventing harmful tax practices

Most countries in the world have a comprehensive CT regime, including most of the GCC Member States

The UAE CT regime will become effective for financial years starting on or after 1 June 2023

Examples:

  • A business that has a financial year starting on 1 July 2023 and ending on 30 June 2024 will become subject to UAE CT from 1 July 2023 (which is the beginning of the first financial year that starts on or after 1 June 2023)
  • A business that has a (calendar year) financial year starting on 1 January 2023 and ending on 31 December 2023 will become subject to UAE CT from 1 January 2024 (which is the beginning of the first financial year that starts on or after 1 June 2023)

The UAE CT is a Federal tax and will therefore apply across all Emirates

The Federal Tax Authority will be responsible for the administration, collection, and enforcement of UAE CT

The Ministry of Finance will remain the ‘competent authority’ for purposes of bilateral/multilateral agreements and the international exchange of information for tax purposes

UAE CT will apply to all UAE businesses and commercial activities alike, except for the extraction of natural resources, which will remain subject to Emirate level corporate taxation

All activities undertaken by a legal entity will be deemed “business activities” and hence be within the scope of UAE CT

This would generally be done by reference to the individual having (or being required to obtain) a business licence or permit to carry out the relevant commercial, industrial and/or professional activity in the UAE

The taxable income will be the accounting net profit of a business, after making adjustments for certain items to be specified under the UAE CT law

The accounting net profit of a business is the amount reported in the financial statements prepared in accordance with internationally acceptable accounting standards

The CT rates are:

  • 0% for taxable income up to AED 375,000;
  • 9% for taxable income above AED 375,000; and
  • a different tax rate for large multinationals that meet specific criteria set with reference to ‘Pillar Two’ of the OECD Base Erosion and Profit Shifting project

 

UAE CT will not apply on an individual’s salary and other employment income (whether received from the public or private sector)

New Corporate Tax in UAE are

1.

Taxable income up to AED 375,000

0%

2.

Taxable income over and above AED 375,000

9%

For More details and questions please download the Corporate Tax  FAQ by clicking here

  • Individuals will not subject to corporate tax on income from employment ,real estate ,investment in shares or other personal income not related to a UAE trade or Business
  • No corporate Tax will be apply on foreign investors who do not carry on Business in the UAE
  • Corporate Tax will apply on the adjusted accounting net profits of the Business
  • Freezone Business that meet that meet all necessary requirements can continue to benefit from corporate tax incentives
  • The extraction of natural resources will remain subject to Emirate Level Corporate Taxation
  • No withholding will apply on capital gains and dividends received by a UAE Business from its qualifying shareholdings.
  • No corporate Tax will apply on qualifying intragroup transactions and restructurings.
  • Foreign Tax will be allowed to be credited against UAE Corporate Tax Payable
  • Generous Loss Transfer and utilization rules will be available to businesses.
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