Corporate Tax in UAE : Explained

Under the UAE Corporate Tax framework, companies both under the category of Resident and Non-Resident are required to register for Corporate Tax. On registering for CT, a Corporate Tax Registration Certificate will be issued. Specific Deadline dates have been derived from the month of company license issue date, if companies fail to register for Corporate Tax by the due date, AED 10,000 will be imposed as penalties by the FTA.

The category has been divided between Resident and Non-Resident, these are known as Taxable persons Under

Category – Resident

• Companies have been incorporated in the UAE whether Freezone (i.e., DMCC, RAKEZ) or Mainland (i.e., Dubai Economy dept.)b) Companies based in Foreign but are effectively managing the  companies established in the UAE
• Individuals who are residency of the UAE, have a valid visa and a permanent residency in the UAE, are conducting business will be required to register.

Under Category – Non-Resident

• Individuals who are not a resident but has a company with a permanent establishment (Place of business) in the UAE which generates revenue equal to or more than of AED 1 million.
• Companies who located in foreign land but has a branch with permanent establishment (Place of business) in the UAE.

Any gross income generated under the category of both resident and non-resident, by the place of business in the UAE, the following rates will apply:

1. 0% rate on AED 0 – AED 375,000 of Taxable profits
2. 9% rate on the amount that exceeds AED 375,000

Under the category of Companies established in freezones, the rates applicable will differ based on gross income generated under Qualifying income criteria or Non-Qualifying income criteria, the following rates will apply:

1. 0% rate applicable on Qualifying income category
2. 9% rate applicable on Non-Qualifying income category

• Required to elect every year for relief
• Income generated should be equal or less than AED 3 million, in both current year and pervious year
• Both Resident and Non-Resident persons are eligible to opt

• Activity Criteria – If the company activity as Financial Institute or Holding company
• Income generated Criteria – Small businesses members of MNE’s (Multinational Enterprises Group), small businesses cannot claim for relief if the Group income is of AED 3.5 billion
• Qualifying Free zone persons Criteria – If a qualifying person comes under the category of 0%, then cannot claim for relief

Companies established in the UAE freezone, may be categorised under 0% rated if criteria mentioned below is met.

Adequate level of presence criteria :

• Company’s core income is earned within the freezone, ensuring a permanent address in present within the UAE and the right number of employees are part of the team.

Income generated criteria :

• If the freezone conducts business within freezone under certain activities.
• If the freezone conducts business with outside freezone under certain activities.

Transferring pricing criteria:

• Comply with Transferring pricing rules and regulations in line with OECD’s arm’s length principle
• As per requirement, companies must maintain supporting documentation for transactions conducted between related parties.

IFRS criteria:

• Audited financials must be in accordance with IFRS (International Financial Reporting Standards)

Submission of Audited Financial Statements:

• Preparing and submitting financial statements as per annual corporate tax returns, clearly mentioning gross income earned from Qualifying and Non income.