Important Things To Know About UAE Corporate Tax In 2023

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Important Things To Know About UAE Corporate Tax In 2023
UAE Corporate Tax

UAE Corporate Tax 2023 :The Ministry of Finance has announced that companies in the UAE will be subject to a 9% federal corporate tax, with a threshold of AED 375,000 from 1st June 2023.

The corporate tax rate in UAE is among the lowest in the world and the most competitive in the GCC—a region where Bahrain is now the only country without a CT regime *.

As of now, the corporate tax regime in UAE will follow best global practices. A number of steps have been taken towards the implementation of this tax policy, which is expected to take effect early next year.

The corporate tax in UAE will be payable on profits as reported in financial statements prepared in accordance with internationally accepted accounting standards.

As a result of this, financial statements must now be audited on time without exception.

With the adoption of corporate tax in the UAE, the tax and compliance requirements of the majority of UAE firms are expected to be drastically altered. Our dedicated tax team at Saif Chartered Accountants will be able to assist you with your corporate tax needs.

The UAE’s new corporate tax system means that businesses will need to work with a tax consultancy. Saif Chartered Accountants, a tax agent approved by the FTA, is an expert in this field, with over 29 years of experience. The company has global exposure with SGA World International and will be able to assist companies once CT is implemented.

The UAE has introduced Corporate Income Tax (CIT) on business profits. For financial years beginning on or after June 2023, the change will take effect. According to the OECD Transfer Pricing Guidelines, UAE businesses will be required to comply with transfer pricing and documentation requirements.

UAE Corporate Tax -FAQ Video

The UAE will not impose corporate taxes on capital gains or dividends, which will continue to boost holding company structures. In the new tax regime, companies can register for group taxation or be taxed as a group. Therefore, inter company losses should be included in taxable profits.

As of June 1, 2023, the Ministry of Finance will introduce a federal corporate tax on business profits.

Tax Rates: Business Income

  • 9% headline corporate tax rate for taxable income exceeding AED 375,000.
  • 0% effective tax rate for taxable income up to AED 375,000 to support small businesses and startups.

Objectives

  • Meeting international standards for tax transparency and preventing harmful tax practices
  •  Enhancing UAE development and transformation for strategic success
UAE Corporate Tax effective Date

UAE Corporate Tax effective Date

Corporate Tax- Effective Date For Financial Years Starting On Or After 1 June 2023 @ 9% for taxable income exceeding AED 375,000.

Features Of The UAE Corporate Incomes Tax

  • Individuals will not be subject to corporate tax on income from employment, real estate, investment in shares or other personal income related to a UAE trade or businesses. 
  • No corporate tax/business taxes will apply on foreign investors who dont carry on business in the UAE. 
  • Corporate tax will apply on the adjusted accounting net profit of the business.
  • Free Zone business that meet all the necessary requirements, can continue to benefit from corporate tax incentives. 
  • The extraction of natural resources will remain subject to Emirates level corporate taxation.
  • No withholding tax will apply on domestic and cross border payments. 
  • No corporate tax will apply on capital gains and dividends received by a UAE business from its qualifying shareholdings.
  • No corporate tax will apply on qualifying intragroup transactions and restructurings.
  • Foreign tax will be allowed to be credited against UAE corporate tax payable. 

Scope of Corporate Tax in UAE

  1. All businesses and individuals conducting business activities under a commercial licence in the UAE
  2. free zone businesses (The UAE CT regime will continue to honour the CT incentives currently being offered to free zone businesses that comply with all regulatory requirements and that do not conduct business set up in the UAE’s mainland.)
  3. Foreign entities and individuals only if they conduct a trade or business in the UAE in an ongoing or regular manner
  4. Banking operations
  5. Businesses engaged in real estate management, construction, development, agency and brokerage activities.

Tax Exemptions -UAE Corporate Tax

The following income shall be in general exempt from income Tax:

  • Dividend income earned by UAE company from its qualifying shareholdings (to be defined in the law)
  • Capital gains
  • Profits from group reorganization
  • Profits from Intra-group transactions


There will be no UAE withholding tax on domestic and cross-border payments.

Considering the exempt income scheme it can be anticipated that the Law shall include a participation exemption or similar principles commonly seen in international markets and businesses would need to evaluate if they will be able to meet the prescribed conditions (if any) to avail the exempt income scheme. 

UAE Tax Calculator (CT)

Example of business tax/UAE Corporate Tax Rates calculation in UAE

DetailsAmount
Net Profit500,000
Less : All deduction**25,000
Net Income475,000
Less : Exempt Amount375,000
Taxable Income100,000
Corporate Tax @9% on9000
**The type of deductions allowed for corporate tax deduction is yet to be made available by the authorities

 

Also, Check : Value Added Tax – UAE VAT : VAT Consultant in Dubai, UAE | Corporate income tax rate: tax rates | tax software

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