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The UAE’s decision to introduce corporate tax marks a pivotal moment in its journey toward economic diversification. This move aligns the nation with global tax standards while maintaining its business-friendly reputation. Here’s what you need to know about corporate tax and how it affects different types of businesses.
A Competitive Tax Framework
Corporate tax is a direct tax applied to the net income or profit of businesses. The UAE’s tax rates remain highly competitive, ensuring that businesses continue to thrive:
• 0% corporate tax rate for taxable income up to AED 375,000.
• 9% corporate tax rate for taxable income exceeding AED 375,000.
This framework is designed to support small and medium-sized enterprises (SMEs) while generating revenue from larger businesses.
Corporate Tax by Business Structure
The corporate tax obligations in the UAE depend on your business’s legal structure. Below is a quick comparison of how different structures being taxed:
| ASPECT | LLC | SOLE ESTABLISHMENT | CIVIL COMPANY (UNINCORPORATED) | CIVIL COMPANY (INCORPORATED) |
| LEGAL STATUS | SEPARATE LEGAL ENTITY | EXTENSION OF THE OWNER | PARTNERSHIP, NOT A LEGAL ENTITY | SEPARATE LEGAL ENTITY TREATED AS A JURIDICAL PERSON |
| LIABILITY | LIMITED TO COMPANY’S LEGAL ASSETS | OWNER PERSONALLY LIABLE | PARTNERS PERSONALY LIABLE | PARTNERS MAYBE PERSONALLY LIABLE UNLESS SPECIFIED |
| TAX RESPONSIBILITY | COMPANY | OWNER (NATURAL PERSON) | INDIVIDUAL PARTNERS | COMPANY |
| CORPORATE TAX RATES | 0% UP TO AED 375,000 ; 9% ABOVE | 0% UP TO AED 375,000 ; 9% ABOVE | BASED ON PARTNER’S AGGREGATED TAXABLE INCOME (0% OR 9%) | 0% UP TO AED 375,000 ; 9% ABOVE |
| REGISTRATION REQUIREMENT | MANDATORY (REGARDLESS OF INCOME) | MANDATORY IF TOTAL REVENUE > AED 1 MILLION | MANDATORY FOR PARTNERS EARNING > AED 1 MILLION | MANDATORY (REGARDSLESS OF INCOME) |
| FILING REQUIREMENTS | FILED BY COMPANY | FILED BY OWNER | FILED BY INDIVIDUAL PARTNERS | FILED BY COMPANY |
| FINANCIALS | CORPORATE FINANCIAL | AGGREGATED FINANCIAL RECORDS | PARTNER FINANCIAL RECORDS | CORPORATE FINANCIAL RECORDS |
Key Considerations:
1. Liability Protection: LLCs provide the advantage of limiting liability to the company’s assets, unlike sole establishments and unincorporated civil companies where personal liability applies.
2. Tax Responsibility: For LLCs and incorporated civil companies, the company itself is responsible for paying corporate tax. Sole establishments and unincorporated civil companies pass this responsibility to individual owners or partners.
3. Registration and Filing: All entities with mandatory registration must file accurate corporate tax returns with the Federal Tax Authority. Registration is required regardless of income for LLCs and incorporated civil companies, while sole establishments and unincorporated partnerships have thresholds.
Why Corporate Tax Matters
Corporate tax ensures compliance with global economic standards, attracts international investors, and reduces dependency on oil revenue. It also promotes accountability and transparency among businesses in the UAE.
Benefits of Early Compliance:
• Avoid penalties by registering on time.
• Gain access to expert advice for optimizing tax strategies.
• Build credibility with stakeholders by adhering to regulatory standards.
The UAE’s corporate tax system strikes a balance between encouraging economic growth and ensuring compliance with global standards. By understanding the obligations tied to their business structure, companies can adapt and thrive in this evolving landscape. For professional guidance, consult with tax experts to ensure your business stays ahead. Contact us at hello@bizzmosis.com or call us at +971 52 979 8169.
This article is drafted by Marco Marazzi, Business Solutions Legal Advisor of Bizzmosis Group.
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