Corporate Tax is a form of tax applied on businesses (applicable requirements are discussed in this article) on the net profits a business gain.
On 31 January 2022, the tax landscape of the UAE shifted when the UAE Government put the Corporate Tax practices implemented in the business world of UAE.
This article will discuss:
- What is the effective date of Corporate Tax Filing in UAE?
- What is the scope of Corporate Tax on businesses operating in the UAE?
- What are the Rates of UAE’s Corporate Tax?
- What is “Exempt Income” regarding Corporate Tax in UAE?
- How can Mubarak Al Ketbi Chartered Accounts help you regarding corporate tax?
What is the effective date of Corporate Tax Filing in UAE?
The CT will take effect on or after June 1, 2023, for fiscal years.
Any business that chooses to implement a fiscal year that begins on June 1, 2023, and ends on May 31, 2024, will be subject to CT as of that date. By the end of 2024, the first tax return submission is probably due.
Any business that chooses to use a calendar year that begins on January 1, 2023, and ends on December 31, 2023, will be subject to CT beginning on January 1, 2024, with the filing deadline probably falling in the middle of 2025.
What is the scope of Corporate Tax on businesses operating in the UAE?
All companies and commercial operations that operate inside the seven emirates are subject to the federal tax system that the UAE has implemented. There are certain exceptions, though:
- Companies involved in natural resource exploitation. The tax decrees issued by the relevant Emirate will still apply to them.
- People who generate revenue in their own right (via salaries or investments), provided that the activity does not necessitate a business license
- Companies that do not do business with the Mainland United Arab Emirates and are registered in free trade zones, as long as they meet all regulatory criteria
What are the Rates of UAE’s Corporate Tax?
A tier structure with three charges is introduced under the recently announced UAE CT regime:
- The 0% rate will apply to all taxable profits under AED 375,000 per year.
- Any taxable profits over AED 375,000 per year will be subject to a 9% tax.
- According to the OECD Base Erosion and Profit-Sharing guidelines, ALL MNEs that are covered by Pillar 2 of the BEPS 2.0 framework—that is, consolidated worldwide revenues above AED 3.15 billion—will be subject to various rates.
Accounting earnings that are subject to specific adjustments are known as taxable profits.
What is “Exempt Income” and what are its effects on Corporate Tax in the UAE?
In general, the following income is free from income tax:
- A UAE company’s dividend income from its eligible shareholdings (as specified by law)
- Gains in capital
- Profits from group reorganization
- Profits from Intra-group transactions
UAE withholding tax will not be applied to both local and international payments.
Considering the exempt income scheme it can be anticipated that the Law shall include a participation exemption or similar principles commonly seen in international markets and businesses would need to evaluate if they will be able to meet the prescribed conditions (if any) to avail the exempt income scheme.
How can Mubarak Al Ketbi Chartered Accountants help my business regarding Corporate Tax?
As you have read, it is essential to obtain proper Corporate Tax Services, especially as a business operating in the UAE. One of the leading accounting and auditing firms in the UAE is Mubarak Al Ketbi Chartered Accounts. We have over 10+ years of experience and have served over 2000+ happy clients. We provide services in Corporate Tax, Auditing, Accounting, VAT Services and more. Contact us today, and we guarantee you professional services!
