Corporate Tax Requirements for Business Branches UAE

Corporate Tax Requirements for Business Branches in UAE

The UAE gives people many reasons to start a business, from a strong economy to a safe business environment. However, the introduction of UAE Corporate Tax, set to begin on or after June 1, 2023, will change the rules for companies in the UAE. Now, businesses and other legal entities that operate in the UAE will need to pay corporate tax on their income. This article explains which business branches must pay corporate tax, plus details on group relief and restructuring relief.

Who Must Pay Corporate Tax in UAE?

The Ministry of Finance in the UAE has announced that every business which is incorporated or managed in the UAE must pay corporate tax at a 9% rate. The tax will apply to all revenue and net income reported in financial records. But, if a business or branch makes less than AED 375,000 net profit, the tax rate is 0%. That means startups and small companies with profits under the threshold won’t pay corporate tax.

Prerequisites for Filing Corporate Tax for UAE Branches

A company that has branches all across the UAE must file a corporate tax return. However, if a branch does not earn any revenue, it may not need to register for corporate tax. Branches and subsidiaries are not considered separate legal entities for tax, so they do not have to file tax returns apart from their parent business. Companies must submit just one corporate tax return, which covers all UAE branches. The government sees each branch as an extension of its parent, so there’s no need for separate registration for tax.

Key points about tax filing for branches:

Branches are not separate legal entities for tax.
Parent company files one tax return for all UAE branches.
No need for branch-level tax registration if there’s no income.

Group Relief under the UAE Corporate Tax

The UAE has made many tax changes to keep its system modern and clear. One helpful rule is group relief. Companies can form a tax group with a parent company and subsidiaries. This group can file taxes as one entity, which makes compliance simpler and can cut overall costs.

With group relief, businesses can:

Offset profits from one group member against losses in another
Simplify tax payments and paperwork
Avoid double counting income or losses

Conditions for Group Relief in UAE Corporate Tax

For a group to qualify for group relief, the following rules must be met:

All companies in the group must be either UAE residents or non-residents with a UAE permanent establishment.
One company must own at least 75% of another, or a third party must own 75% of both.
No company in the group can be exempt from corporate tax.
No group member can be a qualifying free zone person.
All companies in the group must use the same accounting rules and financial year.

Restructuring Relief in UAE Corporate Tax

The new tax law in the UAE makes it easier for businesses to restructure, such as when merging, spinning off, or transferring assets. If a business or part of it is swapped for shares or other ownership interests, the law lets companies defer corporate tax on the transaction. This “restructuring relief” helps companies avoid paying tax on certain gains when they make big changes.

For example:
A business owner can give their company to a new, bigger company and get shares in exchange. As long as the deal meets the rules, it can be tax-free, and the new company can use the tax basis of assets and liabilities from before. No gain or loss has to be reported right away.

Why Consult MAK Auditing for Corporate Tax?

Handling corporate tax in the UAE can be tricky, especially with new rules for branches, group relief, and restructuring. There are exceptions and special rules, so you need to be careful and make sure you do not make mistakes. To keep your business on track, you should reach out to tax professionals like Mubarak Al Ketbi (MAK) Auditing.

Our specialists understand all the latest rules and can help your business:

Figure out if you need to pay tax for branches
Organize and file group returns
Handle paperwork for restructuring and reliefs
Avoid common errors and stay compliant

How Mubarak Al Ketbi (MAK) Auditing Can Help

If you want to keep your business running like a well-oiled machine, don’t let corporate tax be the straw that breaks the camel’s back! At Mubarak Al Ketbi (MAK) Auditing, our team can help you with all your tax worries. We’ll make sure you follow every rule, file the right forms, and get the reliefs you deserve.