Corporate Tax (CT) in the UAE is a direct tax levied on net income or profit after adjustments for certain items specified under UAE CT law. The standard statutory tax rate for annual taxable income up to AED 375,000 is 0%, and for taxable income above AED 375,000, it is 9%. This tax will be effective from June 1, 2023, and applies to all Emirates in the UAE. Registering for UAE CT is mandatory, and companies must file one tax return per financial period (a year) electronically. Failure to comply with the CT regime may result in penalties. Stay compliant with UAE CT laws to avoid penalties and ensure smooth business operations.

By introducing Corporate Tax, the UAE is accelerating its development and transformation while maintaining its competitive position and adhering to international standards. With its corporate tax regime and extensive network of double tax treaties, the UAE has established itself as one of the premier jurisdictions for business and investment. Due to its international standing as a global financial center and business hub, the UAE’s Corporate Tax regime incorporates global best practices as well as universally accepted principles. Through this approach, it is ensured that the UAE Corporate Tax regime’s implications are transparent and well-known to the general public.

To avoid penalties, businesses doing business in the UAE must comply with the UAE Corporate Tax Law and understand the filing requirements. Legal compliance with the Corporate Tax Law is essential to maintaining smooth business operations and guaranteeing a competitive position in the UAE market. Stay informed and up-to-date with the latest tax laws to ensure your company’s success in the UAE.

TAX RATES

CALCULATION

REGISTRATION TIMELINE

Examples of the registration, filing, and payment deadlines associated with Taxable Persons with a Tax Period (Financial Year) ending on 31 May or 31 December (respectively).

FOR MAINLAND COMPANIES

All commercial activities and businesses in the UAE are covered by the scope of work, except for those involved in natural resource extraction. However, Companies will not be subject to corporate tax on:

• Dividends and capital gains earned by a UAE business from its qualifying shareholdings.
• Qualifying intra-group transactions and reorganizations

FOR INDIVIDUALS

Individuals who generate business income through a commercial license or those who hold a business permit/license as a freelancer to conduct commercial, industrial, or professional activities in the UAE are subject to corporate tax. However, such individuals are exempt from corporate tax on:

• income from employment (irrespective of the private or public sector),
• real estate investments             
• dividends, capital gains, and other income earned from owning shares or other securities.
• foreign investor’s income from dividends, capital gains, interest, royalties, and other investment returns
• other personal income not related to a UAE trade or business.
• Interest and other income earned by an individual from bank deposits or saving schemes.

FOR FREE ZONE COMPANIES

The UAE’s corporate tax law includes special provisions for free zones due to their significance, and Article 3 states that the qualifying income of a qualifying free zone person is eligible for a zero percent corporate tax rate. Corporate entities that are registered or established within the free zone are exempt from corporate tax if they meet the specified requirements. What are those requirements, exactly?

• maintains adequate substance in the UAE,
• derives qualifying income as specified in the cabinet decision,
• and complies with prevailing transfer pricing rules and regulations.
• has not elected to be subject to CT, qualifies as a qualifying free zone person.

provisions under the corporate tax regime for tax losses and tax groups

TAX GROUP

A UAE group of companies can form a fiscal unity and can file a single tax return for the entire group (when certain conditions are met)

CORPORATE TAX IMPACT LOSSES

• Businesses are allowed to offset the losses incurred from the corporate tax effective date against the taxable income in subsequent financial periods.
• Extra tax losses can carry forward and be used against future taxable income (when certain conditions are met)
• tax losses of one group company can be used to offset the taxable income of another group company (when certain conditions are met)
  

CORPORATE TAX EXEMPTIONS OR LIMITATIONS?

• No corporate tax will be applied to foreign investors who do not carry on business in the UAE.
• A free zone business that meets all necessary requirements can continue to benefit from corporate tax incentives.
• The extraction of natural resources (oil, gas, etc) will remain subject to emirates level corporate taxation
• No withholding tax is applied on domestic and international payments.
• No corporate tax will be applied on capital gain and dividends received by a UAE business from its qualifying shareholdings.
• Foreign tax will be allowed to be credited against UAE corporate tax payable.

IMPORTANT THINGS YOU NEED TO KNOW ABOUT UAE CORPORATE TAX:

• Make sure your financial statements are prepared in accordance with IFRS.
• 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.
• Companies engaged in extracting and exploiting natural resources carry out such activities under long-term concession agreements with the governments of relevant emirates.
• To be exempt from the individual income from real estate activities is when the individual is not required to obtain a commercial license or permit to carry out such activity in the UAE.
• The final amount of UAE CT payable will be reduced by any foreign taxes incurred on the relevant income.

STAY COMPLIANT & MINIMIZE YOUR TAX LIABILITY!

Bizzmosis has provided professional guidance to businesses related to correct tax implementation and compliance. We also provide our clients with the right information pertaining to all tax updates that need to be adopted to ensure their accounting systems and processes remain compliant with the relevant requirements.

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