Introduction to UAE Corporate Tax Law

In January 2022, Ministry of Finance announced that it will introduce federal corporate tax (CT) on the net profits of businesses. Businesses will become subject to UAE Corporate Tax from the beginning of their first financial year that starts on or after 1 June 2023.CT will be applied across all emirates.

Why is the UAE Introducing Corporate Tax?

As a global financial center and international business hub, the UAE’s Corporate Tax regime aims to support investment, enhance headquarters activities, and ensure the seamless flow of capital, trade, financing, and services. The UAE Corporate Tax regime is designed to align with global best practices while minimizing the compliance burden on businesses.

How Corporate Tax Different from Value-Added tax in the UAE?

The key difference between corporate tax and VAT lies on their tax structures. Corporate tax is a profit-based tax imposed on companies, who pay it directly on their earnings. In contrast, VAT is consumption-based tax paid by consumers when purchasing goods and services, with businesses acting as intermediaries to collect and remit the tax.

How can a Certified UAE Tax Agent Help Businesses with Corporate Tax Compliance?

A certified UAE Tax Agent can assist businesses with corporate tax compliance by ensuring accurate tax filing, helping to calculate taxable income, and advising on eligible deductions. They can also guide business through the process of meeting tax deadline, navigating any regulatory changes, and preparing for audits, ensuring businesses remain compliant and avoid penalties.

Frequently Asked Questions

What are the objectives of UAE Corporate Tax?

By introducing Corporate Tax (CT), the UAE aims to:
– Strengthen its position as a top
global business and investment hub

What are the scopes of Corporate Tax?

Corporate Tax (CT) will apply to:
– All businesses and individuals operating under a commercial license in the UAE
– Free zone businesses (The UAE CT regime will maintain current tax incentives
for free zone businesses that meet regulatory requirements and do not operate
in the UAE’s mainland)

Who must register for Free Zone Corporate Tax?
Any Free Zone entity earning taxable income or meeting the FTA criteria must register for corporate tax and obtain a TRN.
What’s the corporate tax rate for Free Zone companies?
Qualifying Free Zone Persons enjoy 0 % tax on eligible income, while non-qualifying income is taxed at 9 %.
Can a Free Zone company trade with the mainland?
Yes, but income from such activities becomes taxable at 9 %.
What documents are required for registration?
Trade license, passport copies, MOA/AOA, lease agreement, and bank reference letter.
What’s the penalty for late registration?
AED 10,000 as per Cabinet Decision No. 10 of 2024, unless waived by the FTA under specific conditions.

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