Corporate Tax UAE
Due to its status as one of the largest business hubs in the Middle East, the UAE offers significant tax benefits to investors. Several unique tax benefits are offered to companies set up in UAE-free zones as a way to provide additional support to their operations.
Our uae corporate tax is a kind of direct tax imposed on the gross revenue generated by corporations and other legal entities. In a recent announcement, the Ministry of Finance of the United Arab Emirates announced its intention to introduce a federal corporation tax (CT) on January 31, 2022. CT is expected to be effective for companies’ financial periods beginning on or after June 1, 2023.
corporate tax uae will significantly alter most UAE firms’ compliance and tax requirements. You can count on ExpressPRO’s dedicated tax team to provide you with all the support and answers you need regarding corporate tax.
UAE Corporate Tax Application
All business and commercial activities will be subject to UAE Corporate Tax, with the exception of extraction of natural resources, for which Emirate-level taxation will continue to apply.
However, there are some other exceptions:
- A personal income/gain is not subject to corporate tax because it is not considered a business/commercial activity.
- A company registered in a free trade zone must comply with all legal requirements and may charge 0% corporate tax on revenue earned from business income outside the UAE or within a free.
- Corporate taxes do not apply to government entities and entities owned by the government.
- A tax exemption will also be granted to charities and public benefit organizations (upon approval and discretion of the Ministry).
- The Federal Tax Authority (FTA) can exempt regulated investment funds and Real Estate Investment Trusts from UAE Corporate Tax upon meeting certain requirements.
In the coming months, corporate tax will affect the Emirate’s banking tax decree will be revealed. As a result, the corporate tax will affect not only overseas branches of banks but also domestic banks.
It is also important to note that the UAE’s corporate tax legislation will now apply to the international banking sector, which was previously subject to an emirate-level bank tax law.
UAE Corporate Tax Application
The proposed corporate tax rate is as follows:
- A 0% tax rate applies to taxable income up to AED 375,000.
- In the case of taxable income over AED 375,000, a tax rate of 9% applies.
- In accordance with the OECD Base Erosion and Profit-Sharing guidelines, multinational corporations that have combined worldwide revenues exceeding AED 3.15 billion will be able to benefit from varying rates of Base Erosion and Profit-Sharing.
In the coming months, corporate tax will affect the Emirate’s banking tax decree will be revealed. As a result, the corporate tax will affect not only overseas branches of banks but also domestic banks.
It is also important to note that the UAE’s corporate tax legislation will now apply to the international banking sector, which was previously subject to an emirate-level bank tax law.
What is the Purpose of Imposing Federal Corporate Tax in the UAE?
- Developing the country as a significant commercial and investment hub.
- Meet the UAE’s strategic goals by accelerating its development and transformation.
- Establishing international standards for tax transparency.
- Protecting the system from harmful tax methods.
- In order to reduce its reliance on oil revenue.
Effective Date of UAE Corporate Tax
- CT will be applicable for financial years starting on or after June 1, 2023.
- From 1 June 2023, all businesses with a financial year beginning on that date will comply. They will most likely file their first returns by the end of 2024.
- Those businesses that adapt the calendar year from 1 January 2023 will be subject to CT starting from 1 January 2024, and will most likely file their first CT return by mid-2025.
How can ExpressPRO help?
The early preparation of corporate tax compliance is critical for avoiding higher implementation costs and reducing pressure on internal teams to complete these preparations by the deadline.
Whether you are looking for assistance with assessing the challenges and opportunities that introducing a Corporate Tax will bring, the team of experts at ExpressPRO can help.
1. Advisory services:
- Assessment of the impact of Corporate Tax on business and its applicability.
- Statistical analysis of how corporate tax impacts free zones (including financial free zones)
- Provide advice on whether any exemptions are available
- Provide guidance on Group Corporate Taxation and how to minimize risk
- Providing advice on areas of potential corporate tax risk and challenges to taxpayers
- Restructure the business/operational model from a corporate tax perspective
- Provide advice regarding the possibility of claiming Foreign Tax Credits paid by taxpayers from other countries
- Assist with withholding tax matters.
2. Compliance Services:
- Assist with corporate tax registration with the relevant authorities
- Calculation of taxable income and corresponding corporate tax in the UAE
- Filing and preparing tax returns.
3. Providing representation services:
- Providing written submissions to tax authorities
- Provide assistance in responding to tax authorities’ notices
- Filing of a written appeal against adverse tax adjustments made by the tax authorities or penalties imposed by them
- Assisting taxpayers in dealing with the tax authorities.
A corporate tax is a direct tax imposed on the profit or net income of a company in the UAE
As of the first of June in 2023, the United Arab Emirates will implement a corporate tax. Within the allotted time frame, a corporation must register with the FTA and get a Tax Registration Number to begin paying Corporate Tax. According to the UAE Corporate Tax Public Consultation Document, all businesses, including free zone companies, must submit an annual tax return.
UAE corporate tax is applied as follows:
- Profits up to AED 375,000 are tax-free.
- Net profits over AED 375,000 are taxed at 9%.
- As per Pillar 2 of the OECD, multinational corporations should be taxed differently.
- Companies based in a free zone are eligible for a 0% corporate tax rate.
Having an experienced financial expert at your side is vital to avoid errors or non-compliance, which could lead to fines and penalties. If you are seeking reliable support, contact the corporate tax professionals at ExpressCFO. Our team possesses long-standing experience and expertise to guide you through a hassle-free tax registration.
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