Since companies must be ready for the recently announced Corporate Tax, hiring the top tax Consultants in Dubai for tax consultancy services has become imperative. The UAE government has declared the implementation of corporation tax as of 1st June 2023. According to the law, starting with their first fiscal year beginning on or after June 1, 2023, taxable individuals and businesses will be liable to a 9% corporation tax. Companies in the mainland and Free zone can work with the best tax consultant in Dubai to determine the following:
- 1. Whether they are subject to Tax
- 2. Prepare the necessary financial records and documents
- 3. Learn how free zone companies will be taxed
- 4. Comprehend the applicable tax rates, and
- 5. How related party (group companies) and connected person transactions are treated, withholding Tax, and allowable expenses.
- 6. Learn about the exempt income, losses that can be carried forward
Purposes of Corporate Tax
In implementing the Corporate Tax, the UAE hopes to:
- 1. Maintain and expand its status as a major international center for trade and investment.
- 2. Reaffirm its commitment to upholding global standards for tax transparency and avoiding unfair tax practices.
- 3. Speed its growth and transformation to realize its strategic goals and
Scope of Corporate Tax in UAE
Corporate Tax in the UAE applies to:
- 1. The UAE’s commercial license holders include all companies and people undertaking business activities.
- 2. Businesses in free zones (The UAE Corporate Tax regime will continue to honor the Corporate Tax incentives now being provided to free zone enterprises that abide by all legal requirements and do not conduct operations established on the UAE’s mainland.)
- 3. Foreign companies and individuals may only do business in the UAE if they do it regularly or on an ongoing basis.
- 5. Organizations that manage, build, develop, broker, or work in the real estate industry.
- 4. Banking Operations.
Exemption Categories from Corporate Tax
All enterprises that earn more than the 3,75,000 AED profit level are subject to corporate Tax. The corporate Tax in UAE does not apply to all businesses or revenue, however. Following is a list of companies or income that is not subject to corporation tax:
- 1. Individuals won’t be charged business tax. Consequently, all personal income derived from work, real estate, stock investments, and other sources unconnected to a trade or company in the UAE will be free from corporation tax.
- 2. Not relevant to foreign investors who don’t operate businesses in the UAE.
- 3. Businesses operating in free zones are eligible for corporate tax advantages provided they meet all regulatory conditions.
- 4. Corporate Tax is not applied to capital gains or dividends from UAE enterprises’ qualified shareholdings.
- 5. On qualified intragroup mergers and restructurings, corporate Tax is not applicable.
Corporate Tax Rate
According to the Ministry of Finance, the Corporate Tax rates are:
- 1. Up to AED 375,000 in taxable income, there is no tax.
- 2. 9 % for taxable income above AED 375,000.
How is the Corporate Tax Determined in the UAE?
In the UAE, Corporate Tax is determined at 9% of the net profit shown in the business’s financial accounts. Only when the taxable net profit surpasses 375,000 AED will the 9% corporation tax
be applied. There is no tax on net profits up to 3,75,000 AED.
The corporation tax, for instance, will be 9,000 AED if the net profit is 4,75,000 AED (4,75,000-3,75,000 X 9/100).
UAE Free Zone Companies’ Eligibility for Corporate Tax
The qualifying income of the qualifying free zone person is subject to 0% corporate tax (CT) under Article 3 of the Corporate Tax Law. Except for income that is exempt or beyond the scope, all other income earned by a qualified, free-zone individual is subject to a 9% tax.
As seen from the aforementioned legal obligation, free zone persons must pay corporate Tax, and depending on the kind of income, the tax rate may range from 0% to 9%. Free zone residents must abide by corporate tax law since they are subject to taxation.
They are obligated by law to register for corporate Tax, determine their taxable income, complete and file a yearly tax return, pay the applicable taxes, and adhere to other legal requirements. To be clear, there is no minimum level at which a firm must be registered to pay corporation taxes. Even if a company is losing money, had no revenue in the previous year, and anticipates generating none in the next year, it still needs to file for corporate tax registration.
The words “free zone,” “free zone individuals,” “qualified free zone persons,” and “qualifying income” must be understood to apply the corporate Tax to enterprises registered in free zones correctly. According to the UAE Corporate Tax Law, a free zone is ” a designated and defined geographic region within the State that is determined in a decision made by the Cabinet at the
advice of the Minister. ” According to this definition, every UAE free zone is recognized as a free zone for corporate Tax, but we must wait for the cabinet resolution to include the list of free zones for corporate Tax.
Following the legislation, a free zone person is defined as ” A juridical entity incorporated, founded, or otherwise registered in a Free Zone, including a branch of a Nonresident Person registered in a Free Zone. ”
This definition makes it abundantly apparent that a natural person doing business in the United Arab Emirates and a legal entity not based in the free zone cannot be categorized as a free zone person. Free zone residents can be legal entities like limited liability companies, partnerships in which any partner’s liability is not unlimited (also known as limited liability partnerships), funds structured as legal entities, public shareholding companies, public joint stock companies, branches of nonresident legal entities, etc., that have been established and incorporated in the
Company Tax Return Filing, Payment, and Refund
For any tax period, a company must complete and submit one UAE corporate tax return, together with any necessary supporting schedules. There would be no need for companies to submit a provisional Corporation Tax return and pay advance corporate Tax in the UAE. To learn more about administrative requirements, speak with Dubai-based Corporate Tax Consultants. Businesses must also meet the following criteria:
- 1. The registration for corporate Tax and acquisition of a corporate tax registration number will be required of all Taxable Persons (including Free Zone Persons).
- 2. Some Exempt Persons may also be required to register for Corporate Tax by the Federal Tax Authority.
- 3. Within nine months after the conclusion of the applicable period, Taxable Persons must submit a Corporate Tax return for each Tax Period. Any corporate tax owed concerning the tax period for which a return is filed must usually be paid by the same date.
Prepare for filing of Corporate Tax with Tax Consultant in Dubai.
Companies need to be completely prepared to deal with the new form of taxes since the introduction of corporation tax in the UAE would change the nation’s regulatory environment. Companies may get assistance from corporate tax consultants in Dubai, like Farahat & Co., by using their tax assessment and tax advice services. Our team of Accounting Professionals and tax consultants in Dubai can assist businesses in ensuring tax compliance. We have successfully helped hundreds of firms deal with VAT and excise tax, and our stellar track record will be helpful to enterprises as they work to satisfy the criteria for corporate Tax in UAE.
Our Top Corporate tax Consultant in the UAE will assist you with the following queries:
- 1. Whether your company must register for corporate Tax and by when;
- 2. What is your company’s accounting/tax period?
- 3. When will your company be required to submit a Corporate Tax return?
- 4. What choices or applications may your company or should make to comply with corporate tax laws;
- 5. What financial documents and data must your company maintain for corporate tax reasons;