Corporate Tax Consultancy in Dubai
Frequently Asked Questions
UAE Corporate Tax FAQ : Overview
FAQ
Corporate Tax is a form of direct tax levied on the net income or profit of corporations and other businesses.
Corporate Tax is sometimes also referred to as “Corporate Income Tax” or “Business Profits Tax” in other jurisdictions.
The UAE CT regime will become effective for financial years starting on or after 1 June 2023
Examples:
- A business that has a financial year starting on 1 July 2023 and ending on 30 June 2024 will become subject to UAE CT from 1 July 2023 (which is the beginning of the first financial year that starts on or after 1 June 2023)
- A business that has a (calendar year) financial year starting on 1 January 2023 and ending on 31 December 2023 will become subject to UAE CT from 1 January 2024 (which is the beginning of the first financial year that starts on or after 1 June 2023)
The UAE CT is a Federal tax and will therefore apply across all Emirates
The Federal Tax Authority will be responsible for the administration, collection, and enforcement of UAE CT
The Ministry of Finance will remain the ‘competent authority’ for purposes of bilateral/multilateral agreements and the international exchange of information for tax purposes
UAE Corporate Tax FAQ : Scope and rate
FAQ
UAE CT will apply to all UAE businesses and commercial activities alike, except for the extraction of natural resources, which will remain subject to Emirate level corporate taxation
All activities undertaken by a legal entity will be deemed “business activities” and hence be within the scope of UAE CT
How do you determine whether an individual has a “business” that will be within the scope of UAE CT?
This would generally be done by reference to the individual having (or being required to obtain) a business licence or permit to carry out the relevant commercial, industrial and/or professional activity in the UAE
The taxable income will be the accounting net profit of a business, after making adjustments for certain items to be specified under the UAE CT law
The accounting net profit of a business is the amount reported in the financial statements prepared in accordance with internationally acceptable accounting standards
The CT rates are:
- 0% for taxable income up to AED 375,000;
- 9% for taxable income above AED 375,000; and
- a different tax rate for large multinationals that meet specific criteria set with reference to 'Pillar Two' of the OECD Base Erosion and Profit Shifting project
UAE CT will not apply on an individual’s salary and other employment income (whether received from the public or private sector)
The investment in real estate by individuals in their personal capacity should not be subject to UAE CT provided the individual is not required to obtain a commercial license or permit to carry out such activity in the UAE
UAE CT will generally apply to income earned from activities carried out under a freelance license / permit, albeit no CT will be payable unless the annual net income of the freelance professional exceeds AED 375,000 .
The CT liability will be calculated as follows:
- Taxable income of AED 0 - AED 375,000 at 0% = AED 0
- Portion of taxable income exceeding AED 375,000 (i.e. AED 400,000 - AED 375,000 = AED 25,000) at 9% = AED 2,250
The UAE CT liability for the year will be AED 0 + AED 2,250 = AED 2,250
The final amount of UAE CT payable will be reduced by any foreign taxes incurred on the relevant income (see below under ‘Tax Credits’ section)
The CT liability will be calculated as follows:
- Taxable income of AED 0 - AED 375,000 at 0% = AED 0
- Portion of taxable income exceeding AED 375,000 (i.e. AED 400,000 - AED 375,000 = AED 25,000) at 9% = AED 2,250
The UAE CT liability for the year will be AED 0 + AED 2,250 = AED 2,250
The final amount of UAE CT payable will be reduced by any foreign taxes incurred on the relevant income (see below under ‘Tax Credits’ section)
UAE Corporate Tax FAQ : Free zones
FAQ
Free zone businesses will be subject to UAE CT, but 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 with mainland UAE
A business established in a free zone will be required to register and file a CT return
Further details on the compliance obligations of free zone businesses will be provided in due course
The UAE CT treatment that will apply to businesses in free zones will be the same across all free zones
UAE Corporate Tax FAQ : Administration
FAQ
Yes. More information on the registration process and ongoing compliance obligations for businesses will be provided in due course
Only one CT return will need to be filed per financial period. No provisional or advance CT filings will be required
A financial period is generally a year
The CT return will need to be filed electronically. Further guidance will be issued in this regard in due course
UAE businesses will not be required to make advance UAE CT payments
Similar to other taxes in the UAE (e.g. VAT), businesses will be subject to penalties for non-compliance with the CT regime. Further information on the UAE CT compliance obligations and applicable penalties will be released in due course
Related Links : Dubai Vat Consultants | Dubai Corporate Consultants
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