UAE Corporate Tax : Rates, Regulations and Compliance

A complete guide on the UAE corporate tax

Written By Jahnavi- 20th Jan’23

corporate tax in uae

Every nation frequently enacts new laws in an effort to expand its economy and elevate its standing in the international community. One of these nations is the United Arab Emirates. In the United Arab Emirates, a new law has been introduced. A federal corporation tax on firm net gains will now be implemented, according to Federal Decree-Law No. 47 of 2022. All firms must comply with this rule beginning with their first fiscal year that begins on or after June 1, 2023.

The implementation of this UAE corporate tax law will advance the nation’s standing as a global centre for trade and investment. Corporate income tax UAE will facilitate the country’s change and progress, which will make it easier for the nation to accomplish its strategic goals. 

Additionally, this will demonstrate the nation’s legal openness and the fact that it will under no circumstances support destructive tax practices. This is a measure that will help the nation progress, maintain its reputation abroad, and reach new heights.

corporate tax in uae

Why corporate tax in UAE is introduced by governemnt?The Decision was taken keeping in view the OCED guidelines to keep the global minimum corporate tax (CT) rate at 15%.

To guarantee equitable practices, the nation’s corporate tax rates have been determined. The CT is 0% for people with taxable income up to AED 375,000 and 9% for those with incomes over that amount. For huge corporations like big MNCs that satisfy the requirements established by the government, a separate tax rate – which has not yet been specified—will apply. The demands of people, companies, and the nation as a whole have all been taken into consideration while setting these prices. Additionally, a lengthy window has been provided for the enterprises to file their tax filings.

This legislation will be applicable to all business operations carried out in the UAE under a commercial licence, in free zones, or for normal trade or commerce by foreign firms. This law will also apply to banking activities and companies that offer services including real estate management, building, development, agency, and brokerage. Businesses that rely on the extraction of natural resources are, however, excluded from the new corporation tax.

The Federal Tax Authority will impose, collect, and manage this tax. It will hasten the nation’s prosperity during the following 50 years. It is a first step toward a sustainable future with a strong economy and one that is not dependent on oil. It should be emphasised that a resident will be subject to taxation under this regulation regardless of whether their income comes from the UAE or from outside.

The only income that non-residents will pay taxes on comes from sources based in the United Arab Emirates. A person’s residency will be determined in accordance with the conditions outlined by the authorities. They won’t be charged the company tax if these criteria don’t allow them to be considered a resident.

The Ministry of Finance states that for the purposes of corporate tax, companies and other juridical persons that are incorporated, otherwise formed, or recognised under UAE law are automatically regarded as resident persons, while those who are not residents but have a permanent establishment or income derived from the UAE are regarded as non-residents.

At what rates are the UAE corporate taxes set?

To guarantee equitable practices, the UAE corporate tax rate has been determined. The CT is 0% for people with taxable income up to AED 375,000 and 9% for those with incomes over that amount.

For huge corporations like big MNCs  that satisfy the requirements established by the government, a separate tax rate – which has not yet been specified—will apply.

The demands of people, companies, and the nation as a whole have all been taken into consideration while setting the corporate tax in Dubai. Additionally, a lengthy window has been provided for the enterprises to file their tax filings.

Who has to pay the UAE corporate taxes?

The UAE corporation tax will be applicable to all business operations carried out in the UAE under a commercial licence, in free zones, or for normal trade or commerce by foreign firms. This law will also apply to banking activities and companies that offer services including real estate management, building, development, agency, and brokerage.

Who is exempted from paying the corporate tax?Let’s look at the incomes and businesses exempted from corporate tax in UAE.

Businesses that rely on the extraction of natural resources are, however, excluded from the new UAE corporate tax. The corporation tax exemption will also apply to the dividends and capital gains from the qualifying ownership, qualifying intra-group transactions, and qualifying reorganisation. 

Additionally, individual salaries and other work perks are exempt from the CT. Besides this , it has been decided to exempt from paying corporate tax the interest and income from bank deposits and savings plans, income from dividends, capital gains, interest, royalties, and other types of investment returns for a foreign investor, as well as investments made in real estate by individuals.

Who will impose the corporate tax?

The Federal Tax Authority will impose, collect, and manage the corporate income tax UAE. It will hasten the nation’s prosperity during the following 50 years. It is a first step toward a sustainable future with a strong economy and one that is not dependent on oil. It should be emphasised that a resident will be subject to taxation under this regulation regardless of whether their income comes from the UAE or from outside.

The only income that non-residents will pay taxes on comes from sources based in the United Arab Emirates. A person’s residency will be determined in accordance with the conditions outlined by the authorities. They won’t be charged the company tax if these criteria don’t allow them to be considered a resident.

The Ministry of Finance states that for the purposes of  UAE corporate tax, companies and other juridical persons that are incorporated, otherwise formed, or recognised under UAE law are automatically regarded as resident persons, while those who are not residents but have a permanent establishment or income derived from the UAE are regarded as non-residents.

What are tax groups?

To create a tax group, two or more people must fulfil the legal requirements. When corporate tax is implemented, a tax group is viewed as a single company for the purpose of corporate tax in Dubai. The only legal entities that can create a tax group are those that are residents. Both the main firm and its subsidiaries must adhere to this. Additionally, they must adopt the same accounting principles and fiscal year when putting up their financial statements.

 A minimum of 95% of the share capital, 95% of the voting rights, and a minimum of 95% of the earnings and net assets of the subsidiary shall belong to the parent business.

It should be emphasised that an exempt person or a qualified free zone cannot be a part of the tax group. Through subsidiaries, the ownership, rights, and entitlement may be held directly or indirectly.

What are the procedures for filing, registering, and paying the corporate taxes?

  • The actions that must be taken in order to pay UAE corporation tax are as follows:
  • A company tax registration number must be obtained by those who are subject to taxation.It may also be necessary to ask some exempt individuals to register for the business tax.
  • The taxable people shall file a corporation tax return. Within nine months after the end of the tax period, this must be completed.
  • VAT and CT must be paid separately if you are registered for VAT; nevertheless, even if your company is not registered for VAT, you may still be required to pay CT. Both taxes, which are entirely distinct from one another, are still in effect in the UAE.
  • The implementation of CT will not result in the elimination of VAT or excise tax in the nation. All of the UAE’s emirates will also be subject to the tax. Understanding the regulations and every other element of your business will be helpful when applying for the CT.
  • The Federal Tax Authority has asked everyone to study the information on the company tax law and other supporting material available on the official government websites.You may use the same to examine the situation and decide if your company must pay corporation tax or not.
  • To keep up with any current changes or additions to the legislation, everyone should frequently visit the websites.
  • For help, you can contact RadiantBiz. We can help you file and register your income tax.Contact our experts to get started today. 

Frequently Asked Questions

How is the corporate tax in the UAE calculated?

If the income shown in the financial statements of the company exceeds AED 375,000 then the corporate tax will be 9% of the income.

How will the corporate tax affect your income or profit?

The corporate tax in the UAE has been set at a lower value of 9% which will not cause a major difference to the earnings. Moreover, the UAE corporate tax will be applied only on the profits earned and not the entire income. This will ensure that you are not forced to pay taxes in difficult situations.

What is the UAE corporate tax imposed on?

The UAE corporate tax is imposed on the businesses that are carried out in the UAE mainland or free zones with a commercial licence. The tax imposed depends on the income of the businesses.

What kinds of entities are free from the UAE corporate tax?

The new UAE corporation tax doesn't apply to companies that depend on natural resource extraction. Dividends and capital gains from qualifying ownership, qualifying intra-group transactions, and qualifying reorganisation will also be excluded from corporation tax. The CT does not apply to individual wages or other benefits received at work. In addition, interest and income from bank deposits and savings plans, income from dividends, capital gains, interest, royalties, and other forms of investment returns for a foreign investor, as well as individual real estate investments are also excluded from the UAE corporate tax.

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