The UAE Ministry of Finance introduced a Corporate Tax on business profits, effective June 1, 2023. This tax reform aims to promote small and medium enterprises by implementing an introductory statutory tax rate of 9% on corporate profits exceeding AED 375,000 ($102,000). In contrast, profits below that threshold will be exempt from taxation. Compliance with corporate tax regulations is mandatory for all applicable companies in the UAE, including filing annual tax returns and maintaining proper accounting records following the relevant laws and regulations.
The corporate Tax UAE was introduced to assist the UAE in achieving its strategic goals and hasten its growth and transition. With the UAE’s vast network of double tax treaties, the assurance of a competitive corporate tax structure that complies with international norms would solidify the UAE’s position as a top business and investment location. Given the UAE’s status as a worldwide financial and economic center, the UAE Corporate Tax Code draws on best practices worldwide and contains well-recognized and respected concepts. As a result, the UAE Corporate Tax Law is ensured to be clear in its ramifications and easy to understand.
Corporate Tax will be levied at a headline corporate tax rate of 9% on Taxable Income exceeding AED 375,000. Taxable Income below this threshold will be subject to a 0% rate of Corporate Tax. Corporate Tax will be charged on Taxable Income as follows:
1. Resident Taxable Persons
Corporate Tax will apply to:
The following “Taxable Persons” are generally subject to corporate Tax in UAE:
Following a qualifying income basis, qualified free zone residents are entitled to 0% Corporate Tax. These corporations must fulfil the qualifications and standards outlined in Article 18 of the Corporate Tax Law to be classified as eligible free zone people.
The following Income and associated expenses will not be included in calculating the Taxable Income:
Under Article 4 of the Corporate Tax Law, the following Persons shall be exempt from Corporate Tax:a) A Government Entity.
b) A Government Controlled Entity.
c) A Person engaged in an Extractive Business that meets the following conditions:
d) A Person engaged in a Non-Extractive Natural Resource Business that meets the following conditions:
e) A Qualifying Public Benefit Entity
f) A Qualifying Investment Fund.
g) A public pension or social security fund, or a private pension or social security fund that is subject to regulatory oversight of the competent authority in the State and that meets any other conditions that the Minister may prescribe.
h) A juridical person incorporated in the State that is wholly owned and controlled by an Exempt
Person and conducts any of the following:
A Qualifying Free Zone Person may take advantage of a special Corporate Tax rate of 0% on their “Qualifying Income” exclusively. A Free Zone Person must meet the following criteria to qualify as a Qualifying Free Zone Person:
A Qualifying Free Zone Person may be subject to additional requirements by the Minister.
Suppose a non-resident company has a permanent presence in the UAE. In that case, it must additionally pay corporate tax on that company’s revenue and any income that comes from sources within the control of the Government (such as the sale of products, the rendering of services, etc.). Non-residents are not required to pay company tax on their revenue from flying airplanes and operating ships in international space. Income received via an investment manager on real estate or any other investment is not subject to corporation tax for non-residents.
Only some people are aware of their actions to retain their position as tax-paying people and enterprises regarding taxation. Obtaining the services of expert Corporate Tax Consultants becomes crucial at this point, as it protects persons and organizations from legal repercussions. Keep your tax affairs in order, pay your dues on time with the help of a Corporate Tax Consultant, and continue to enjoy the prestige and respect that comes with paying your taxes. Our UAE Corporate Tax Consultants have extensive expertise in assisting clients in resolving their tax profiles through legal ways and applicable exemptions. Similarly, our UAE corporate tax advisory services daily align their tax portfolios with applicable laws and taxes.