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UAE Corporate Tax : An Explanatory Guide

Subsequent to the issuance of Federal Decree Law No. 47 of 2022 on the Taxation of Corporations and Businesses in the UAE, Taxable Persons are required to register for corporate tax and to meet all requisite conditions. Hence, it is advisable for Taxable Persons to seek the services of trusted Tax Consultants in UAE to ensure Corporate Tax readiness and to maintain compliance with Corporate Tax regulations. 

Corporate Tax in UAE pertains to a standard tax levied on the net income or net profit of taxable entities. The corporate tax rate is set at 0% for taxable income up to AED 375,000 and 9% for taxable income exceeding AED 375,000. The presence of Corporate Tax in UAE reinforces the country's position as a significant global business hub, fostering progress toward its central policies. Additionally, the implementation of the Corporate Tax Regime aligns the UAE with international tax standards, aiming to prevent undesirable tax practices.

Corporate Tax in the UAE applies to both Resident Persons and Non-resident persons. A Resident Person encompasses various entities established within the UAE, including non-exempted Free Zone Persons, Foreign entities effectively managed and controlled within the country, and natural persons engaged in business activities in the UAE. Income derived from a Resident Person or from a Non-resident Person, which is paid or accrued in connection with a Permanent Establishment of that Non-resident Person in the UAE or derived from activities, assets, capital, rights, or services in the UAE, constitutes State Sourced Income.

Read More: Guide to Dubai Real Estate Corporation Tax

For the purposes of corporate tax, a Non-resident Person refers to any individual or entity not meeting the criteria for a Resident Person. This includes Non-UAE Resident Persons with a Permanent Establishment in the UAE and Non-UAE Resident Persons earning State Sourced Income. A Permanent Establishment in the UAE represents a fixed or permanent place within the country from which business operations, or a part thereof, are conducted. Examples include branches, factories, or buildings, unless specific exceptions apply, or the entity habitually exercises the authority to conduct business activities in the UAE.

Essentially, Taxable Persons are required to prepare their financial statements in accordance with the accepted accounting standards in the UAE, namely the International Financial Reporting Standards (IFRS).

Farahat & Co, a reputable Tax Consultant in UAE, actively participates in numerous corporate Tax Awareness programs, focusing on promoting Corporate Tax readiness and compliance. Noncompliance with the Corporate Tax Regulations in the UAE can result in significant fines for Taxable Persons. Therefore, it is advisable for Taxable Persons to seek the services of trusted Tax Consultants in the UAE to effectively prepare and register for Corporate Tax, ensuring compliance with the Corporate Tax Statute in the country.

Read More: Corporate Tax in UAE for Oil and Gas Industries

Ervee is a CPA with international experience in Tax and Accounting. He has over 12 years of experience in accounting and bookkeeping and over a year in VAT implementation, registration, and accounting in UAE. He regularly drives out inefficiencies in company operations and loves the challenge of helping clients find additional ways for an easier and improved compliance and verification of transactions.