Corporate Tax in the UAE

Corporate Tax in the UAE
Corporate Tax in the UAE

Corporate Tax in the UAE: The Ministry of Finance of the United Arab Emirates (UAE) announced on January 31, 2022 that the federal Corporate Tax (“CT”) would take effect as of the fiscal year starting June 1, 2023.

Based on the aforementioned announcement, the Ministry of Finance published a consultation document to gather and evaluate the responses of stakeholders (“Consultation Document”) concerning the most prominent features of the legislation and its implementation ahead of the release of the draft CT legislation.

Rates:

  • 0% for taxable income up to AED 375,000;
  • 9% for taxable income above AED 375,000
CT in Free Zone

According to an announcement by the Ministry of Finance, free zone businesses will be subject to corporate tax, and they will be required to submit corporate tax returns. 

The Ministry of Finance has, however, stated that the new regime will honour the tax incentives currently offered to free zone establishments, provided that they meet applicable regulatory requirements and do not conduct business onshore in the UAE.

The application of corporate tax will have an impact on market entry strategies and corporate structuring in the UAE.

Companies operating in the UAE will need to consider how corporate taxation may affect their existing business structures, shareholding arrangements, agreements between group companies, their ability to utilize losses or other corporate tax reliefs, and whether proposed reorganizations or disposals qualify for corporate tax reliefs (such as in respect of qualifying intra-group transactions or the disposal of qualifying holdings) or may result in unexpected corporate tax liabilities.

International companies with marketing or so-called “rep-offices” in the UAE should also consider whether these offices will now be considered as taxable permanent establishments, as well as whether the FTA will seek to attribute substantial taxable profits to these offices.

Corporate Tax in the UAE

Corporate tax (CT) is a form of direct tax levied on the net income or profit of corporations and other entities from their business. Corporate Tax is sometimes also referred to as “Corporate Income Tax (CIT)” or “Business Profits Tax” in other jurisdictions.

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