UAE Corporate Tax: A Quick Guide for Businesses

The United Arab Emirates has been one of the favorite countries for businesses and investors because of its zero-tax policy. However, the UAE government in December 2022 announced a corporate tax UAE of 9% rate which is the first-ever in the history of the tax regime.

This new corporate tax applies to every business setup in UAE mainland and came into effect with 1st June 2023 fiscal year across all Emirates. Well, it was interesting news for investors, entrepreneurs, businesses, and corporations all over the world and the UAE.

That is why understanding the new corporate tax in the UAE and remaining compliant with these regulations is crucial for everyone. This article will outline all the necessary aspects that one needs to understand the corporate tax UAE, how to stay compliant with it, and what its importance for businesses is.

Keep on reading for the insightful details:

Understanding the Basics of UAE Corporate Tax

The UAE corporate tax law has many aspects delegated at the Ministry, Cabinet, or tax authority level. That’s why the decisions regarding the law provisions are released by the Cabinet and the ministry. Let’s see what it is all about.

What is Corporate Tax?

Corporate tax or CT is a direct tax that is levied on corporations and businesses on their net income or profit. Corporate Tax is also referred to as “Corporate Income Tax (CIT)” or you may have seen terms like “Business Profits Tax” being used.

When did the UAE Introduce Corporate Tax?

On December 9, 2022, the United Arab Emirates Ministry of Finance (MoF) introduced the tax on corporations and businesses with the Federal Decree-Law No. 47 of 2022, known as CIT Law.

Businesses and corporations are required to meet all the law requirements and stay compliant with the CT law which was implemented and effective on June 1, 2023.

Who Needs to Register for Corporate Tax?

The federal tax system of the UAE applies to all corporations, and commercial activities conducted by businesses within the seven states of the United Arab Emirates including Business Consultant in Dubai. Also, the foreign banking sectors are subjected to the UAE Federal Tax Law that was working under the Emirate-level Bank tax decree.

Tax Rates and Exemptions

Corporate tax

 

Well, every business entity in the UAE has to register for their corporate taxation with the Federal Tax Authority (FTA) of UAE. It is necessary for businesses having UAE Business License to know Taxable Profits Calculation and have Corporate Tax Registration Number, whether they fall in the tax bracket or not. Below are the details for tax rates and exemptions:

What is the Corporate Tax Rate?

There are different tax tiers and Taxable Profits Calculation for the businesses announced UAE Corporate tax regime:

  • 0% rate for businesses with profits under AED 375,000 annually.
  • 9% rate for all businesses with AED 375,000 annual taxable profits.
  • A miscellaneously unique tax rate for Multi Nation Corporates (not yet specified) that meets specified criteria set by the Federal Tax Authority with considerations of ‘Pillar two’ of the OECD Profit Shifting Project and Base Erosion.

Is There a Tax-Free Threshold?

Yes the tax-free threshold is there and as per the Ministry of Finance (MoF) Corporate Tax rates are as follows:

Taxable Person Tax Rate
Businesses with an annual income of  AED 375,000 0% tax rate
Businesses with AED 375,000 annual profits 9% tax rate
Qualified Free Zone Person 0% tax rate on qualified income

9% tax rate on non-qualified income

Are There Any Tax Exemptions or Reliefs?

Yes, exemptions and relieves are provided to the following income brackets from Corporate Tax:

  • The dividend income that is  earned by the company of the UAE from its law-defined qualifying shareholdings
  • Capital gains
  • Profits that are gained from group reorganization
  • Profits that are gained from transactions of intra-group
  • The domestic and cross-border payments will not have any withholding tax (WHT)

Also, the corporate tax application also has exceptions for:

  • Businesses that are related to the natural resource extraction of natural resources.
  • Salaried Individuals or private investors who earn within their personal capacity and do not need a commercial license in UAE.
  • Businesses and service providers in Free Trade Zones (for example, Free Zone business setup in Jebel Ali) who are complying with all the requirements of regulations, and are not involved in UAE’s mainland businesses.

Registration and Compliance

All Taxable businesses whether they are businesses setup in UAE mainland or are Free Zone Persons, are required for Corporate Tax registration and must get a Corporate Tax Registration Number.

How to Register for Corporate Tax?

Here are the simple procedures and crucial steps to register for a Corporate Tax UAE.

  1. Visit the Emaratax portal and create an account
  2. Provide your email ID and Phone number and create your ID with a password.
  3. Create your own taxable person or select from the list of taxable persons already available
  4. You’ll have access to the option to register for Corporate Tax. P
  5. Select the relevant option and complete your tax registration.

What are the Filing Requirements?

All Taxable Persons with commercial license in UAE must register themselves electronically through the EmaraTax Portal for their Corporate Tax UAE, even if their VAT registration has been done. Even, businesses that have no tax liability also have to register for CT and obtain a Corporate Tax Registration Number.

Even a person who is exempted from tax is required to register, and these may include:

  • Public and qualifying private pension funds
  • Social security funds
  • Qualifying Investment Funds
  • Juridical persons owned by certain Exempt Persons

The document requirements for the tax registration are:

  • Trade license if applicable
  • Industrial license in UAE
  • Passport and Emirates ID of the applicant
  • Authorized Signatory’s Passport
  • Authorized Signatory’s Authorization Proof

Important Dates and Deadlines

According to the Federal Decree Law 47, Article 48, operational businesses in the UAE must submit their Corporate Tax within 9 months of the end of their fiscal year, until or unless a timeline specified to them is different.

Date for Corporate Tax UAE return For July 2023 to June 2024 fiscal year: 31 March 2025

Date for Corporate Tax UAE return For January 2024 to December 2024 fiscal year: 30 September 2025

Additional Resources and Support

As all matters related to taxation are under the MoF, administration, tax collection and tax law enforcement of the Corporate Tax UAE is the responsibility of the Federal Tax Authority (FTA).

Where to Find More Information?

You can visit the FTA website for more references or if you need any guide about corporate tax UAE, information on the detailed registration process, and file your tax returns.

Seeking Professional Tax Advice

Well, the landscape of the UAE is full of businesses who that want to stay compliant with the Corporate Tax Law. If you are one of them, contact Connect Free Zone today and get the most professional Tax Advice on your corporate tax UAE.

We have a team of professionals with extensive legal and financial knowledge to help you out in every situation you face being a business in the UAE. Feel free to reach out to us and secure your business in the UAE.

Conclusion

Corporate tax UAE is a strategic policy that will not only benefit the economic growth of the UAE but also leverage business with several benefits that the UAE government has planned for.

With the very nominal rate of 9%, the corporate tax return must be met by all businesses operating within the UAE mainland, and Free Zones. If you want to get more information related to this or other topics, you can visit our website or contact us for a detailed discussion.

Neelisha Khandhway

Neelisha-Khandhway-imgNeelisha KhandhwayAn Associate member of institute of company Secretaries of India with around 6 years of experience in india and uae in providing Company Secretarial, Legal and Corporate Governance services including Compliance, Risk Management, Due Diligence, Anti-Money Laundering (AML), Drafting and vetting of Agreements.

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