On 03.10.2022, the United Arab Emirates (UAE) Ministry of Finance (MoF) announced to the general public the introduction of a new tax regime, “The Corporate Tax in UAE.”
The main purpose for the implementation of this new tax law was to expand the sources of the country’s state revenue and aim to strengthen the UAE’s position as a leading hub for doing business across the globe.
The UAE corporate tax later came into effect on June 3rd, 2023, emphasizing that all taxable persons or businesses in UAE with an annual profit above 375,000Dhs will be subjected to a 9% tax rate.
If you are a business owner in the UAE, it is wise to have an in-depth understanding of the UAE tax regime.
In this blog article, we will guide you on all you need to know about UAE corporate tax compliance.
Also, if you are looking for a reliable business advisory service provider to guide you on how you can setup your company in the UAE and all tax-related services in the UAE, you can book a free consultation with our experts.
What is Corporate Tax (CT)?
The Corporate Tax (CT), also known as “Corporate Income Tax,” is a form of tax directly levied on the annual net profit of a business or taxable person.
Who is Eligible to Pay Corporate Tax in UAE?
As per the UAE Federal Tax Authority (FTA), all taxable persons and businesses in the UAE are eligible to pay a 9% corporate tax rate if their annual net profits exit 375,000Dhs.
Examples of businesses eligible for the corporate income tax in UAE include:
- Businesses performing banking activities
- All companies with a trade license in UAE performing investment activities
- Foreign companies and investors who regularly conduct trading in the UAE
- Businesses that are involved in Real Estate Development and Management, construction, and Brokerage in UAE
Who is Exempted from paying the UAE Corporate Tax?
Though the corporate tax is levied on profit-making organizations in the UAE, some categories are exempted from paying UAE income tax. These include:
- Businesses with annual net profits below 375,000Dhs
- Charitable organizations,
- All government-controlled entities
- Personal income derived from bank savings and deposits
- Pension and Social Security funds
The Impact of Income Tax on Businesses in UAE
Though the UAE is amongst the countries with the lowest tax rates, the introduction of income tax in UAE has subjected a 9% tax rate on businesses in the UAE making profits above 375,000Dhs, thereby potentially reducing their net profits.
However, the new tax regime in the UAE is promoting competition in the UAE market as businesses now consider these taxes when setting prices for their products and services.
Corporate Tax on UAE Freezones
All free zone entities in UAE are generally entitled to pay a 9% tax rate for profits above 375,000 Dhs. In the case where a qualifying freezone person satisfies the condition for De Minimis, “i.e., earning qualifying income,” the said freezone person can claim the benefits of a 0% tax rate.
You can get more insight from our related blog post on UAE corporate tax on freezone entities by clicking the link below.
How Corporate Business Services (CBS) can help
If you have any questions or doubts related to the implementation of UAE corporate tax, our expert business advisors in Dubai are here to guide you. They will provide you with all the latest information and advice related to starting a business in UAE, accounting and bookkeeping, and all tax compliances in UAE. To get started, you can book a free consultation with us now.