UAE Corporate Tax

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UAE to impose a federal corporate tax for the first time

UAE’s Ministry of Finance has implemented a Federal Corporate Tax with a standard rate of 9%. Federal corporate tax rate of 9%, huge deduction and tax losses rules, and generous foreign tax credits, UAE has boosted its attractiveness as a law-abiding yet friendly tax country. The corporate tax will be applied to all businesses and commercial activities alike except the extraction of natural resources i.e., oil and gas. This will remain subject to emirate-level corporate taxation.

There are different federal corporate tax rates depending on the income:

  • 0% rate will be applicable for taxable income up to AED 375,000.
  • 9% rate will be applicable for taxable income above AED 375,000
federal corporate tax in UAE

When will UAE’s corporate tax regime become effective?

The tax will come into effect for relevant businesses from June 1, 2023. For that business whose financial starts from 1 July 2023 and ends on 30 June 2023, they will be subject to UAE Corporate Tax from 1 July 2023. And for that business whose financial year starts from 1 January 2023 and ends on 31st December 2023, they will be subject to UAE Taxes from 1 January 2024. Although there is plenty of time for a business to prepare depending upon the size and business activities it would be safe to start planning as early as possible.

What is the scope of the UAE Corporate Tax regime?

According to UAE corporate tax 2023 law, all businesses will be subject to corporate tax except those that are into the extraction of natural resources. The banking and real estate sector would also come under it.

The initial guidelines passed by the Ministry of Finance suggest that the corporate tax regime would be residence-based with the taxation of worldwide profits of the businesses in UAE. The nonresidents of UAE would be taxed on the basis of their UAE-sourced business income.

A business license or a permit is one of the most important to conduct commercial, industrial, or professional activity in the UAE. Based on the place of incorporation or registration or the location of management and control, a business would be considered a resident, and accordingly, the corporate tax will be imposed.

Tax consolidation, losses, and credits:

Broad usage of tax losses carried forward against taxable income would be foreseen by the UAE corporate tax regime under certain circumstances.

Further, a group of companies in UAE will have the chance to construct a tax unity and be treated as a single taxable entity by carrying de facto tax consolidation in the country.

If the foreign corporate tax is paid on UAE taxable income, it would be permitted as a tax credit against the UAE corporate tax liability.

Who is eligible to pay Federal Corporate Tax?

The Federal Corporate Tax will be applicable in the following cases –

* Individuals will not be subject to corporate tax on their income,
* Foreign investors who do not carry business in UAE are not eligible for Corporate Tax
* Corporate Tax will be applied on adjusted accounting net profit
* Businesses that operate as corporate entities or as sole proprietorships will be eligible to pay Federal Corporate Tax
* Intragroup transactions and corporate reorganization are not subject to Corporate Tax, provided the circumstances.

Who is eligible to pay Federal Corporate Tax?

The introduction of Corporate Tax showcases the commitment of the UAE to meet the international standards regarding tax transparency and prevention from harmful tax practices. A Corporate Taxation based on the best international practices will position UAE as a leading business and investment hub which will ultimately accelerate the UAE’s development.


How Elevate Auditing and Accounting can help in filing Corporate Tax?

UAE affirms its ability to wisely maintain a balance between complying with the international standards by maintaining its attractiveness as a business hub. The UAE federal corporate tax will ensure that the burden for businesses is kept to minimum for those who maintain proper financial statements. Elevate Auditing and Accounting is an Auditing firm in UAE, which will help the business to file the Corporate Tax by following all the rules passed by the Ministry of Finance in UAE. With our great services, we have earned great reliability in our clientele base and in UAE.