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Corporate Tax in UAE

Corporate Tax in UAE is a direct Tax paid on corporations and other enterprises’ net income or profits. The UAE Ministry of Finance announced on January 31, 2022, the implementation of a federal corporate tax in the UAE, which will be effective for fiscal years beginning on or after June 1, 2023. Such taxes are generally computed on a business’s accounting net profit/income after adjusting for certain items specified in UAE Corporate Tax law.

What is Corporate Tax?

Corporate Tax in UAE is a direct Tax paid on companies and other enterprises’ net revenue or profit. In other countries, Corporate Tax is also known as “Corporate Income Tax” or “Business Profits Tax.”

Applicability of Corporate Tax in UAE?

The UAE corporate tax policy will be among the most competitive globally, with a standard statutory tax rate of 9%.
For the encouragement of small firms and startups, a 0% tax rate applies to taxable earnings up to Dh375,000. Personal income from employment, real estate, and other investments, and any other income generated by people not derived from a business or different kind of commercial activity licensed or otherwise authorized to be conducted in the UAE, will be exempt from corporation tax.

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Importance of UAE Corporate Tax

A competitive Corporate Tax regime based on worldwide best practices would strengthen the UAE’s position as a major global center for business and investment and expedite the UAE’s development and economic growth to meet its strategic goals. Implementing a Corporate Tax regime underscores the UAE’s commitment to upholding international tax transparency requirements and eliminating harmful tax practices.

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Types of Taxes imposed by UAE Government?

Individuals in the UAE are not subject to income tax, but they are subject to various taxes. The following taxes are imposed in the UAE, according to the official UAE Government website:

  • 1. Excise tax

It is imposed on some commodities known to be hazardous to human health or the environment. To purchase such items, consumers must pay a higher price. The goal is to “lower consumption of unhealthy and damaging goods while simultaneously increasing government income that may be used to fund useful public programs.”

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When does the UAE’s Corporate Tax regime come into effect?

For financial years beginning on or after June 1, 2023, the UAE Corporate Tax regime will take effect.
For Example: From July 1 2023 to June 30 2024, a firm with a financial year commencing on July 1, 2023, and ending on June 30 2024, will be subject to UAE CT (which is the beginning of the first financial year that starts on or after June 1 2023)
A company with a (calendar year) financial year that begins on January 1 2023, and ends on December 31 2023, will be subject to UAE CT commencing on January 1 2024, which is the first financial year that begins on or after June 1 2023.

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How Farahat & Co. may assist you?

Not everyone is aware of their actions to retain their position as tax-paying people and enterprises when it comes to the complicated subject of taxation. Obtaining the services of expert tax professionals becomes crucial at this point, as it protects persons and organizations from legal repercussions. You may keep your tax affairs in order and pay your dues on time with the help of a Tax professional, and continue to enjoy the prestige and respect that comes with paying your taxes. Our Dubai Corporate tax experts have extensive expertise in assisting clients in resolving their tax profiles through legal ways and applicable exemptions. Similarly, our UAE corporate tax advisory services in aligning their tax portfolios with applicable laws and taxes daily.

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Frequently Asked Questions

Will UAE Corporate Tax apply to all enterprises in each Emirate?

Yes, as the UAE Corporate Tax is a federal tax, it applies to states of the Emirates.

To whom will the UAE Corporate Tax apply?

Except for exploiting natural resources, which will be subject to Emirate-level corporate taxes, UAE CT will apply to all UAE firms and commercial activities.

Will the UAE Corporate Tax apply to foreign companies and persons?

Only foreign firms and people that conduct continuous or regular trade or business in the UAE will be subject to UAE Corporate Tax.

How can you know if someone has a 'company' covered by UAE Corporate Tax?

It is usually accomplished by referencing the individual’s possession of (or requirement to get) a business license or permission to engage in the relevant commercial, industrial, and professional activity in the UAE.

How can you know if a legal entity has an 'enterprise' that falls under the UAE CT's jurisdiction?

All actions carried out by a legal entity shall be considered “business activities” and hence fall within the UAE Corporate Tax.

How do you figure up how much of your business earnings or revenue is subject to UAE Corporate Tax?

The accounting net profit/income of a firm will be the taxable income after adjustments for specific elements to be stipulated under UAE Corporate Tax legislation.
The amount disclosed in the financial accounts prepared in line with globally accepted accounting standards is the accounting net profit/income of a firm.

Will a person investing in UAE real estate be subject to the UAE Corporate Tax?

Individuals investing in real estate in their personal capacity should be exempt from the UAE Corporate Tax if they are not required to get a commercial license or licence to do such business in the UAE.

Will a freelance professional's earnings be subject to UAE CT?