Corporate Tax in Sharjah UAE
The UAE has made an announcement for the commencement of Corporate Tax in the UAE on businesses. This article will guide you regarding corporate tax,proper auditing is required.
| – | What is Corporate Tax? |
| – | Who is subject to Corporate Tax? |
| – | Who is exempt from Corporate Tax? |
| – | How is a Taxable Person subject to Corporate Tax Sharjah – UAE? |
| – | Who is a resident and non-resident? |
| – | What is Corporate Tax imposed on? |
| – | What is the rate of Business Tax Sharjah – UAE & Withholding Tax rate? |
| – | What is the due date to file for Corporate Tax? |
| – | How can Mubarak Al Ketbi Chartered Accountants help you to register for Corporate Tax Sharjah? |
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What is Corporate Tax?
Corporate tax is a type of direct tax imposed on the net income of corporations and other businesses. Corporate Tax is also known as “Corporate Income Tax” or “Business Profits Tax” in other jurisdictions.
Who is subject to Corporate Tax?
Corporate Tax generally applies to the following “Taxable Persons”
| 1. | UAE companies and other juridical persons that are incorporated or effectively managed and controlled in the UAE; |
| 2. | Natural persons (individuals) who conduct a Business or Business Activity in the UAE as specified in a Cabinet Decision to be issued in due course; and |
| 3. | Non-resident juridical persons (foreign legal entities) with a Permanent Establishment in the UAE (as explained in [Section 8]). |
Juridical persons created in a UAE Free Zone are also considered “Taxable Persons” under Corporate Tax Law and must follow the conditions outlined therein. However, if a Free Zone Person meets the qualifications for being considered a Qualifying Free Zone Person, they can benefit from a Corporate Tax rate of 0% on their Qualifying Income.
Non-resident individuals who do not have a Permanent Establishment in the UAE or who generate UAE-sourced income unrelated to their Permanent Establishment may be subject to Withholding Tax (at the 0% rate). Withholding tax is a type of corporate tax that the payer collects at the source on behalf of the income receiver. Withholding taxes occur in many tax systems and are often levied on cross-border payments of dividends, interest, royalties, and other types of income.
Who is exempt from Corporate Tax?
Certain types of businesses or organisations are exempt from Corporate Tax given their importance and contribution to the social fabric and economy of the UAE. These are known as Exempt Persons and include:
| Ruling: | Business/Corporation/Entity: |
|---|---|
| Automatically exempt | Government Entities Government Controlled Entities that are specified in a Cabinet Decision |
| Ruling: Exempt if notified to the Ministry of Finance (and subject to meeting certain conditions) | Extractive Businesses Non-Extractive Natural Resource Businesses |
| Exempt if applied to and approved by the Federal Tax Authority (and subject to meeting certain conditions that will be discussed later) | Public or private pension and social security funds Qualifying Investment Funds Wholly-owned and controlled UAE subsidiaries of a Government Entity, a Government Controlled Entity, a Qualifying Investment Fund, or a public or private pension or social security fund |
In addition to not being subject to Corporate Tax, Government Entities, Government Controlled Entities specified in a Cabinet Decision, Extractive Businesses, and Non-Extractive Natural Resource Businesses may be exempt from any registration, filing, and other compliance obligations imposed by the Corporate Tax Law, unless they engage in a Corporate Tax-chargeable activity.
What is the due date to file for Corporate Tax?
There are different due dates for different company accounting years. If your company was issued a licence in January or February, mark your calendars for May 31st, 2024, because that is when the due date is due.
If you fail to meet this deadline, there is a hefty fine!
How can Mubarak Al Ketbi Chartered Accountants help you to register for Corporate Tax Sharjah?
If you have read through this whole article without falling asleep or becoming confused, congratulations!
The Corporate Tax Law is quite complex, and the due date is marching ever so slowly. Mubarak Al Ketbi Chartered Accountants can provide for you excellent servicing regarding corporate tax, as the Managing Director, Muhammad Farooq Sulayman Farooq, is a registered Corporate Tax Accountant, so his expertise can greatly benefit you. We also provide many other services, like company liquidation, auditing, bookkeeping, financial statements report, accounting, and many more. Contact Us!
How is a Taxable Person subject to Corporate Tax Sharjah – UAE?
The Corporate Tax Law, like other nations’ tax regimes, levies income based on both residency and source. The Taxable Person’s categorization determines the appropriate basis of taxes.
| – | A “resident person” is taxed on income earned from both domestic and international sources (residence basis). |
| – | A “Non-Resident Person” will only be taxed on income earned within the UAE (source basis). |
Residence for corporate tax purposes is determined by particular elements outlined in the Corporate Tax Law, rather than where a person resides or is domiciled. If a person does not meet the requirements for being a Resident or a Non-Resident, they will not be considered a Taxable Person and hence will not be liable to orporate Tax.
Who is a resident and who is a non-resident?
Companies and other juridical entities that are stablished, created, or recognised by UAE legislation are automatically deemed Resident entities for Corporate Tax purposes. This includes juridical persons formed in the UAE by either mainland legislation or relevant Free Zone regulations, as well as those constituted by a articular statute (e.g., a special decree).
Foreign corporations and other legal entities may be considered as Resident Persons for Corporate Tax purposes if they are properly managed and controlled in the UAE. This will be established based on the entity’s unique circumstances and operations, with one decisive element being where critical management and commercial decisions are taken in substance.
Natural individuals will be subject to Corporate Tax as a “Resident Person” on income from both domestic and international sources, but only if the money is obtained from a business or business activity undertaken by the natural person within the UAE. Any other income received by a natural person would not be subject to corporate tax.
Non-Resident Persons are legal entities that are not Resident Persons and:
| – | Have a Permanent Establishment in the UAE; or |
| – | Derive State Sourced Income. |
Non-resident persons shall be liable to Corporate Tax on Taxable Income attributable to their Permanent Establishment (as indicated in Section 8). Certain UAE-sourced income of a non-resident person that is not traceable to a permanent establishment in the UAE will be subject to 0% withholding tax.
What is Corporate Tax imposed on?
Corporate tax is imposed on taxable income produced by a taxpayer during a tax period.
Corporate Tax would typically be levied on a yearly basis, with the Taxable Person calculating their burden through self-assessment. This implies that the Taxable Person calculates and pays corporate tax by filing a Corporate Tax Return with the Federal Tax Authority.
The starting point for determining Taxable Income is the Taxable Person’s accounting income (i.e. net profit or loss before tax) as shown on their financial accounts. The Taxable Person will then need to make certain modifications to calculate their Taxable Income for the applicable Tax Period.
What is the rate of Business Tax Sharjah – UAE & Withholding Tax rate?
Corporate tax will be charged at a headline rate of 9% on Taxable Income in excess of AED 375,000. Taxable income below this amount will be subject to a 0% corporate tax rate. Corporate tax will be levied on taxable income as follows:
| Resident Taxable Persons: | Percentage: |
| Taxable Income not exceeding AED 375,000 (this amount is to be confirmed) | 0% |
| Taxable Income exceeding AED 375,000 | 9% |
| Qualifying Free Zone Person: | |
| Qualifying Income | 0% |
| Taxable Income that does not meet the Qualifying Income definition | 9% |
Certain forms of UAE-sourced income sent to nonresidents may be subject to a 0% withholding tax rate. Because of the 0% rate, no withholding tax is owed in practice, and there are no withholding tax-related registration and reporting requirements for UAE firms or overseas beneficiaries of UAE-sourced revenue. Withholding tax does not apply to transactions between UAE residents.