31st January 2022 – The Federal Tax Authorities (FTA) in UAE has announced that the Corporate Tax of 9% will be levied to businesses effective from financial years commencing on or after 1st June 2023.
This is part of UAE’s aim to align the country’s corporate sector with best international practices for tax transparency.
CORPORATE TAX INTRODUCTION IN UAE
31st January 2022 – The Federal Tax Authorities in UAE has announced that the Corporate Tax (CT) of 9% will be levied to businesses effective from financial years commencing on or after 1 June 2023.
This is part of UAE’s aim to align the country’s corporate sector with best international practices for tax transparency.
The Corporate Tax is equivalent to 9% of Accounting Profit at the end of the Financial Year and will be applicable at the following rates:
Taxable Income | Corporate Tax Rate |
AED 0 – AED 375,000 | 0% |
Above AED 375,000 | 9% |
UAE CT will be applicable across all Emirates and will apply to all business and commercial activities alike, except for the extraction of natural resources, which will continue to be subject to Emirate level taxation.
Some of the Key Points about UAE Corporate Tax are as follows:
Financial Year
The UAE Corporate Tax 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)
Freezone Companies
Freezone Companies will still enjoy the benefit of 0% Corporate Tax as long as regulatory requirements are met and do not conduct businesses in Mainland UAE.
Personal/ Individual Income
Corporate Tax does not impact income from employment, investment in shares, investment in real estate, income from savings and any other income earned by individuals in their personal capacity as or any other activity that is not related to doing business or trade in UAE.
No withholding tax at domestic or international level shall be levied on domestic and cross border payments of interest, dividends, royalties. Foreign tax credit will be allowed to set off the domestic Corporate Tax Liability.
Corporate Tax exemptions will be allowed to:
- Capital gains and dividends earned from specified shareholdings;
- Qualifying intra-group transactions and restructurings
UAE companies can form a Tax Group, allowing the same to create one Tax file Returns. Tax Losses may be allowed to be adjusted within the group.
Moreover, transfer pricing rules and documentations will apply as per OECD TP Guidelines.
The Corporate Tax shall be filed once for each financial period electronically with minimal compliance requirements and with no required advance payment/ provisional returns on businesses.
Further guidance is expected from the Federal Tax Authorities to help businesses get ready and be fully compliant.
The FAQ’s Corporate Tax are published by FTA here.
For information you can email our consultants at dubai@kelmer.com