UAE Corporate TAX

Q: 1. What is the corporate tax in the UAE?

Corporate tax in the UAE is a direct tax imposed on corporations and other business entities’ net income or profits. It is also known as ‘Corporate Income Tax’ or ‘Business Profits Tax.’ In simple terms, it is a tax applied to the net profits earned by businesses, requiring them to pay a set amount of their profits as tax.

Q: 7. How is the corporate tax in the UAE calculated?

The UAE corporate tax rate calculation involves applying a rate of 9% to the net profit declared in the company’s financial statements. The 9% corporate tax is applicable only if the taxable net profit exceeds 375,000 AED. Any net profit up to 375,000 AED is taxed at 0%. For instance, if your net profit is 475,000 AED, your corporate tax will be 9,000 AED (475,000 – 375,000) x (9/100).

Increase Your Knowledge Of Corporate Taxes In The UAE With Us

Whether a small business or a large multi-corporation in the UAE, you owe money to the government. But navigating these tricky waters can be hard if you don’t have the correct information. This is where our content comes in handy. You can learn everything about corporate taxes in the UAE through our various informative articles, blogs, and more.

Our range of content ensures that, as a company, your business is not halted or shut down because of unpaid taxes you did not know about. The new introduction of UAE corporate tax rates puts all companies earning more than 375,000 AED under the purview.

Things To Keep In Mind About The UAE Corporate Tax Law

In a recent announcement, the authorities in the UAE VAT Corporate tax have revealed their decision to introduce corporate tax starting from June 1st, 2023. According to the new law, any taxable individual or business will be subject to a 9% UAE corporate tax law, effective from the beginning of their first financial year after June 1, 2023.

This development has stirred up significant interest among businesses and tax professionals alike. The UAE will soon rank 4th among the GCC countries to implement a federal corporate tax, marking a noteworthy shift in their economic landscape. The primary objective behind introducing the Corporate Tax Registration Deadline UAE is to bolster the country’s global business and investment hub status.

Furthermore, this move is expected to expedite their strategic goal of achieving growth and transformation. By adopting the concept of Dubai corporate tax, the UAE also aims to align with international standards for tax transparency and avoid any potentially detrimental tax practices. As corporate tax is a novel concept in the UAE, it becomes imperative for businesses to grasp its implications fully.

How To Register For Corporate Tax UAE 2023?

If you are a taxable person, you must complete the corporate tax registration in the UAE. The process is extremely simple. It takes just 30 minutes to complete the form, and the FTA takes around 20 business days to get back. But, if they need additional information, you will need to resubmit the application with the additional information. This will require an additional 20 business days to get back. The process to register is easy:

First, go to this site.
You will need your trade license and Emirates ID/ passport if you are a natural person. If you are a legal person, you will need your trade license, Emirates ID/ Passport of the authorized signatory, and proof of authorization for the authorized signatory.
You should then create an account on the Emaratax portal by registering with your email ID and Phone number or log in if you already have an account.
Create your taxable person or select the relevant person from the taxable person’s list.
Then you will see the option to register for corporate tax in the UAE. Select this option and follow through with the rest of the corporate tax registration in the UAE.

Get Help Step By Step With The Corporate Tax UAE User Manual

Registering for taxes has never been this easy. If you are new to taxes and are finding navigating the tax industry tough, the FTA’s user manual will come in handy. Now, you won’t have to worry about UAE corporate tax rates with the help of the user manual. With a step-by-step guide, even a child can register for this!

The user manual ensures that no person struggles. Not only does it provide information on how to navigate EmaraTax, but gives detailed knowledge on each and every tab on the form. You can learn about each step and section through the guide, ensuring that you complete your UAE corporate tax law registration in no time.

Why The UAE Corporate Tax 2023 Has Been Implemented?

Implementing corporate tax in the UAE is a competitive advantage, enticing foreign investments to the region. For business owners, paying corporate taxes can prove more advantageous than paying additional individual income tax.

This adoption of UAE corporate tax 2023 aligns with international best practices and further solidifies the UAE’s position as a prominent global hub for business and investment. Consequently, it propels the country’s progress and transformation, facilitating the achievement of strategic objectives while underscoring its unwavering commitment to tax transparency and thwarting harmful tax practices.

Learn About The Importance Of Books Of Accounts In Corporate Taxes

Our treasure trove of information is here to ensure you learn everything about the corporate tax law in the UAE, including the Books of Accounts. In the era of digital transformation, all GCC countries, including the UAE, have embraced the use of accounting or business management software to digitize their books of accounts.

With the introduction of VAT a few years ago and the proposed corporate tax, relying on manual bookkeeping is no longer a viable option, and businesses must now prioritize automating their financial processes using business management software. As the calculation of corporate tax hinges on the net profit derived from financial statements, the accuracy of these records becomes even more crucial for businesses.

How to Calculate Corporate income tax UAE Provision?

The precise data recorded in the books will determine the correctness of financial statements, ensuring that the UAE VAT Corporate tax liability is accurately assessed. This highlights the necessity for businesses to invest in dependable business management software, which will streamline their financial operations and make them corporate tax-ready well before its implementation.

The Corporate Tax Rates In Other GCC Countries

Corporate Tax Registration Deadline UAE across the GCC countries vary significantly, ranging from 10% in Qatar to 15% in Kuwait and Oman, with Saudi Arabia imposing a 20% corporate tax. However, the UAE is set to introduce a relatively lower rate of 9% on business profits starting from June 1, 2023. Bahrain is also preparing to implement the corporate tax in the same year.

UAE Corporate Tax Rate is levied on the portion of profits attributable in Kuwait, Saudi Arabia, and Qatar to non-GCC shareholders of local entities. For instance, in Saudi Arabia, corporate tax applies solely to the income earned by non-Saudi owners of businesses. Each GCC country adopts its unique approach to corporate tax regulations, shaping the business landscape across the region.

What Is The Limit Of The Corporate Tax Applicability?

As per the UAE Ministry of Finance, Corporate Tax Registration Deadline UAE will only be applicable when the income surpasses the specified threshold limit. For all cases where the net income falls below the threshold, it will be exempt from corporate tax. The corporate tax UAE applicability limit is as follows:

0% for taxable income that reaches AED 375,000
9% for taxable income above AED 375,000
A different tax rate (yet to be specified) will apply to large multinationals that meet specific criteria.

It is important to clarify that a multinational enterprise refers to a business operating both in its home country and other countries through foreign subsidiaries, branches, or other forms of presence/registration. Without a foreign presence or registration, the income generated outside its home country would not qualify a business as a multinational corporation. This distinction is essential for determining the appropriate tax rate and exemptions under the corporate tax law in the UAE.

Businesses That Are Applicable For The UAE Corporate Tax 2023

According to the UAE Ministry of Finance announcement, the responsibility for the administration, collection, and enforcement of corporate social responsibility examples in UAE will lie with the Federal Tax Authority (FTA). It will apply to the following entities and individuals:

All businesses and individuals involved in business activities under a commercial license in the UAE.
Free zone businesses operating within the UAE.
Foreign businesses and people that conduct trade or business in the UAE on an ongoing or daily basis. This determination is subjective and depends on factors such as management and control, availability of a permanent establishment, and the source of income.

Banking operations within the UAE.
Businesses in the UAE in real estate management, construction, development, agency, and brokerage activities.

The FTA will be responsible for implementing and overseeing corporate tax compliance for these entities and individuals as part of the UAE’s efforts to strengthen its taxation framework and ensure fair and consistent application of the corporate tax regulations.

Corporate Tax UAE 2023 And Free Zone Persons

Under the UAE corporate tax regulations, an individual who fulfills all the necessary conditions to be classified as a Qualifying Free Zone Person will enjoy a 0% Corporate income tax UAE rate on their qualifying income. However, any taxable income that does not meet the criteria for qualifying income will be subject to a 9% corporate tax rate. Do you qualify as a Free Zone person according to the corporate tax UAE 2023? If you don’t meet the below conditions, you won’t qualify as a Free Zone person:

Maintain sufficient substance in the UAE, which entails actively conducting business activities within the jurisdiction rather than solely registering for tax-related purposes.
Earn “Qualifying Income,” the specific details of which will be defined in the Cabinet Decision.
Comply with transfer pricing rules and keep the necessary documentation in order.
Choose not to opt for paying the corporate tax in full, thereby availing themselves of the favorable 0% tax rate on their qualifying income.

Freelancers And The Corporate Tax UAE 2023

Under the corporate tax UAE 2023, income earned from activities conducted under a freelance license or permit will be subject to Corporate income tax UAE provisions. However, no corporate tax will be payable unless the annual net earnings of the freelance professional in the UAE exceed AED 375,000. This threshold ensures that freelance professionals with lower earnings are exempt from corporate tax obligations. At the same time, those surpassing the specified limit will be liable to pay corporate tax on their net earnings. The tax regulation balances taxation and supports freelance businesses in the UAE.

What You Need To Do To Prepare For The Corporate Tax?

Companies need to plan and prepare themselves for the impending corporate tax regulations, as they will significantly impact business operations.
To begin with, businesses should review their previous financial records to determine their eligibility for corporate tax. This evaluation will help assess whether their annual net earnings exceed the AED 375,000 threshold.
As financial reports gain greater significance, businesses must invest in robust accounting software to ensure accuracy and compliance with the upcoming tax requirements.
Additionally, companies should prioritize training and updating their teams on the Corporate Training Companies in UAE rules to ensure everyone is well-informed and equipped to handle the changes effectively.
Evaluating how introducing Corporate tax UAE might affect business obligations and liabilities under existing contracts with customers and suppliers is crucial.
Furthermore, businesses must comprehend the implications of corporate tax on their books of account and financial statements, as these records will play a critical role in staying compliant with the new tax regulations. By taking proactive steps and being prepared, companies can confidently navigate the Corporate Training Companies in UAE landscape and ensure a smooth transition to the new tax regime.

Penalties On Taxable People That Violate Provisions Of UAE Corporate Tax Law

Under the Tax Procedures Law, the Authority will specify the penalties and fines applicable to taxpayers who commit violations in accordance with the Dubai corporate tax law.

Penalties and fines will be imposed in non-compliance with Corporate Training Companies in UAE rules and regulations. The severity of the penalty may vary, and it could involve jail time, a monetary fine, or a combination of both, depending on the nature and extent of the violation.

The penalties may include a fine of up to a certain multiple of the unpaid tax amount. The imposition of penalties aims to enforce compliance with the Corporate Tax Law UAE, ensuring that taxpayers fulfill their obligations and responsibilities as per the established regulations. Businesses must adhere to the tax law and avoid violations to avoid potential legal consequences and financial liabilities.

Tax Loss Relief And The Corporate Training Companies in UAE

According to Article 37 of the tax law, businesses can offset tax losses against the taxable income of future tax periods. This provision allows businesses to reduce their taxable income, lowering their overall tax liability. However, it is important to consider that tax losses can only be offset against up to 75% of the taxable income (before applying for tax loss relief) in any subsequent tax period.

When carrying forward tax losses to a subsequent tax period, businesses can set them off against that specific period. If any tax losses remain after this offset, they can be carried forward to the next subsequent period. It’s important to note that carry-forward tax losses take priority and are set off first if any tax losses are transferred under Article 38 of the tax law. This mechanism allows businesses to strategically utilize their tax losses, optimizing tax planning and management.

When Do You Not Qualify For The Tax Loss Relief

Under the corporate tax UAE, there are specific circumstances where a taxable person or business cannot claim tax loss relief. These situations are as follows:

Tax loss relief cannot be claimed for losses incurred by a business before the commencement of the Corporate Tax Law UAE regime.
Tax loss relief does not apply to losses incurred by a business before it becomes a taxable person under the Corporate Tax Law UAE.
Losses arising from an asset or activity exempted under the decree-law are not eligible for tax loss relief.

Frequently Asked Questions

1. What is the corporate tax in the UAE?

Corporate tax in the UAE is a direct tax imposed on corporations and other business entities’ net income or profits. It is also known as ‘Corporate Income Tax’ or ‘Business Profits Tax.’ In simple terms, it is a tax applied to the net profits earned by businesses, requiring them to pay a set amount of their profits as tax.

2. Who is subject to paying corporate tax in the UAE?

All businesses with a taxable net profit exceeding 375,000 AED are subject to UAE corporate tax 2023 and must pay a certain percentage of their net profit as Corporate Training Companies in UAE.

3. What is the corporate tax rate in the UAE?

The corporate tax rate is set at 9% of the net profits earned by businesses. The corporate tax rate is 0% to support small businesses and startups, if the net profit is up to 375,000 AED.

4. When will the federal corporate tax be implemented in the UAE?

Implementing the federal corporate tax will be effective from the start of the financial year commencing on or after 1st June 2023.

5. When was the corporate tax law released by the authorities?

The government released the corporate tax law on December 2020. It is available on the official website of the UAE Ministry of Finance. Interested individuals can download the UAE corporate tax law from there.

6. What businesses or incomes are exempt from corporate tax in the UAE?

Businesses whose net profit does not exceed 375,000 AED are exempt from corporate tax UAE 2023. Additionally, certain types of businesses or income are also exempt, which include:

Separate income through investment in shares, real state, employment, and other personal income not related to a trade or business in the UAE.
Foreign investors that don’t conduct business in the UAE.
Free zone businesses that comply with all regulatory requirements enjoy corporate tax incentives.
Capital gains and dividends taken by UAE businesses from shareholders that qualify.
Qualifying intragroup transactions and restructurings.

7. How is the corporate tax in the UAE calculated?

The UAE corporate tax rate calculation involves applying a rate of 9% to the net profit declared in the company’s financial statements. The 9% corporate tax is applicable only if the taxable net profit exceeds 375,000 AED. Any net profit up to 375,000 AED is taxed at 0%. For instance, if your net profit is 475,000 AED, your corporate tax will be 9,000 AED (475,000 – 375,000) x (9/100).