What is Corporate Income Tax?
Corporate Income tax (CIT) is a form of direct tax levied on the net income or profit of corporations and other entities from their businesses. Tax on Corporate Profits is sometimes also referred to as UAE Federal Corporate Tax or Business Income Tax in the UAE in other jurisdictions. Taxes on corporate Income are based on income from different resources.
What is the Corporate Income Tax UAE?
Corporate Tax is sometimes also referred to as Taxes on corporate Income or Business Profits Tax. Tax on Corporate Profits is used to help the UAE Taxable Income achieve its strategic objectives and accelerate its development and transformation. The certainty of a competitive Corporate Tax regime that adheres to international standards, together with the UAE extensive network of double tax treaties, will cement the UAE position as a leading jurisdiction for Business Income Tax in the UAE and investment.
What is Corporate Income Tax Imposed On?
Corporate Income Tax is imposed on Taxable Income earned by a Taxable Person in a Tax Period. Taxes on corporate Income would generally be imposed annually, with the Tax on Corporate Profits liability calculated by the Taxable Person on a self-assessment basis. This means that the calculation and payment of Business Income Tax in the UAE is done through the filing of a Corporate Tax Return with the Federal Tax Authority by the Taxable Person.
Scope of UAE Corporate Tax Calculator
The UAE has introduced a federal tax system that is applicable to all businesses and commercial activities operating within the emirates. However, there are certain exceptions:
Businesses operating in the extraction of natural resources. These will continue to be subject to the tax decrees issued by the respective Emirate and State and Local Taxes.
Individuals earning income in their personal capacity as long as the income generating activity does not require a commercial licence.
Business Income Tax in the UAE registered in Free Trade Zones, provided they comply with all the regulatory requirements, and do not conduct business with Mainland UAE.
Who is subject to Corporate Income Tax?
Broadly, Tax on Corporate Profits applies to the following Taxable Persons:
UAE companies and other juridical persons that are incorporated or effectively managed and controlled in the UAE.
Non-resident juridical persons foreign legal entities that have a Permanent Establishment in the UAE.
Juridical persons established in a UAE Free Zone are also within the scope of Corporate Tax as Taxable Persons and will need to comply with the requirements set out in the Corporate Tax Law.
How Do Multi State Corporations Pay State UAE Federal Corporate Tax?
Most states use the federal definition of corporate income as the starting point for their state Taxes on corporate Income and Cross Border Taxation. States do deviate from the federal rules in some instances for example, states use various rules for the treatment of net operating losses but state corporate taxable income mostly mirrors federal taxable income.
Final Words
Corporate Income Tax is a form of direct tax levied on the net income or profit of corporations and other entities of their business. UAE Federal Corporate Tax are based on net worth and also profits from different businesses and resources of income. UAE Federal Corporate Tax would generally be imposed annually, with the Corporate Tax liability calculated by the Taxable Person on a self-assessment basis.
FAQ’s
Who Is Exempt From Corporate Tax?
In addition to not being subject to Corporate Income Tax, Government Entities, Government Controlled Entities that are specified in a Cabinet Decision, Extractive Businesses.
Does the UAE Have an Income Tax?
The UAE does not levy income tax on individuals. However, it levies corporate tax on oil companies and foreign banks.
