UAE Corporate Tax

1. Introduction to UAE Corporate Tax

Corporate tax is a direct tax levied on the net income or profits of companies and other entities. Corporate tax in the UAE is governed by Federal Decree No. 47 of 2022 and Federal Decree No. 60 of 2023 as amended.

2. Objectives of corporate tax

• The introduction of corporate tax in the UAE has several strategic objectives:
• • Enhanced global competitiveness: By implementing a competitive corporate tax system, the UAE aims to consolidate its position as a leading global business and investment hub.
• • Economic development: Tax revenues will support the UAE's development and transformation goals.
• • International compliance: The UAE reaffirms its commitment to international standards for tax transparency and prevention of harmful tax practices.

3. Scope of application of corporate tax

• Corporate tax applies to:
• • All businesses and individuals that hold a commercial license to do business in the UAE.
• • Free zone businesses that meet regulatory requirements and do not conduct business in the UAE mainland.
• • Foreign entities and individuals that continuously or regularly carry on trade or business in the UAE.
• • Banking businesses and businesses engaged in real estate management, construction, development, agency and brokerage activities.
• Exemptions from corporate tax:
• Certain entities and sources of income are exempt from corporate tax:
• • Natural resource extraction businesses, which remain subject to emirate-level taxation.
• • Dividends and capital gains received by UAE businesses from qualifying equity.
• • Qualifying intra-group transactions and reorganizations that meet certain conditions.
• • Income received by individuals from wages, bank deposits, savings plans, and real estate and securities investments.

4. Corporate tax rate

• The UAE's corporate tax rate structure is competitive:
• •0%: Applicable to taxable income up to AED 375,000.
• •9%: Applicable to taxable income above AED 375,000.
• •Different rates may apply to large multinational companies that meet certain criteria of the OECD's Base Erosion and Profit Shifting (BEPS) framework.

5. Compliance and reporting

• Businesses subject to corporate tax must comply with compliance and reporting requirements, including:
• • Annual tax returns: Businesses must file a tax return each year detailing their taxable income and taxes payable.
• • Record keeping: Income, expenses, and other relevant financial information must be accurately recorded.
• • Penalties: Failure to comply with tax regulations may result in penalties, including fines and other legal consequences.

6. Timeline

• October 10, 2022: The Corporate Tax Code is published in the Official Gazette.
• • October 25, 2022: The Corporate Tax Code enters into force.
• • January 1, 2023 to February 28, 2025: Registration period (26 months).
• • June 1, 2023: The Corporate Tax Code begins to apply to taxpayers.
• • June 1, 2023 to May 31, 2024: First tax period

7. Conclusion

The introduction of corporate tax in the UAE represents a key development in the country’s economic policy. By aligning with global tax standards and fostering a transparent and competitive business environment, the UAE aims to attract and retain international businesses and investors. As the corporate tax regime evolves, businesses operating in the UAE must stay informed and compliant in order to navigate this new landscape effectively.