Tax Agency Number (TAN) 30004113
UAE Corporate Tax 2023 – In the UAE, the introduction of corporate tax has necessitated major changes in the tax and compliance requirements of most UAE firms. Our dedicated tax team at Saif Chartered Accountants can help you with your corporate tax needs.
Saif Chartered Accountants can assist you with the UAE Corporate Tax, which has been adopted by the UAE. Our team of experts will make sure your firm is prepared for these changes.
The United Arab Emirates has introduced a Corporate tax on business profits. The change will take effect for financial years beginning on or after June 2023. UAE businesses must adhere to the OECD Transfer Pricing Guidelines in reference to related-party transactions.
The following kinds of income will be exempt from federal income tax: 1. Dividend income earned by UAE company 2. Profits from group reorganization 3. Profits from Intra-group transactions 4. Capital gains
There will be no UAE withholding tax on domestic and cross-border 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. (more)
Each registered business would have to register for the Corporate tax, and each year, they would be required to pay 9% of their adjusted taxable profits above the exemption threshold of Dh375,000. The CT would be their short-term liability, which would adversely affect their working capital. Businesses would consider this impact when preparing budgets for the respective period and plan accordingly.
Example of business tax/UAE Corporate Tax Rates calculation in UAE
Details | Amount |
---|---|
Net Profit | 500,000 |
Less : All deduction** | 25,000 |
Net Income | 475,000 |
Less : Exempt Amount | 375,000 |
Taxable Income | 100,000 |
Corporate Tax @9% on ----- | 9000 |
✓ Individuals will not be subject to corporate tax on income from employment, real estate, investment in shares or other personal income ✓ No corporate tax/business taxes will apply on foreign investors who dont carry on business in the UAE. ✓ Corporate tax will apply on the adjusted accounting net profit of the business. ✓ Free Zone business that meet all the necessary requirements, can continue to benefit from corporate tax incentives. ✓ The extraction of natural resources will remain subject to Emirates level corporate taxation. ✓ No withholding tax will apply on domestic and cross border payments. ✓ No corporate tax will apply on capital gains and dividends received by a UAE business from its qualifying shareholdings. ✓ No corporate tax will apply on qualifying intragroup transactions and restructurings. ✓ Foreign tax will be allowed to be credited against UAE corporate tax payable.
Corporate Tax is a form of direct tax levied on the net income or profit of corporations and other businesses. Corporate Tax is sometimes also referred to as “Corporate Income Tax” or “Business Profits Tax” in other jurisdictions.
A competitive CT regime based on international best practices will cement the UAE’s position as a leading global hub for business and investment, and accelerate the UAE’s development and transformation to achieve its strategic objectives
Introducing a CT regime reaffirms the UAE’s commitment to meeting international standards for tax transparency and preventing harmful tax practices
he UAE CT regime will become effective for financial years starting on or after 1 June 2023
Examples:
The UAE CT is a Federal tax and will therefore apply across all Emirates
UAE CT will apply to all UAE businesses and commercial activities alike, except for the extraction of natural resources, which will remain subject to Emirate level corporate taxation
All activities undertaken by a legal entity will be deemed “business activities” and hence be within the scope of UAE CT
This would generally be done by reference to the individual having (or being required to obtain) a business licence or permit to carry out the relevant commercial, industrial and/or professional activity in the UAE
The CT rates are:
A multinational corporation is a corporation that operates in its home country, as well as in other countries through a foreign subsidiary, branch or other form of presence / registration. Merely earning income from outside its home country without a foreign presence or registration would not make a business a multinational corporation
In the context of the global minimum effective tax rate as proposed under 'Pillar Two' of the OECD Base Erosion and Profit Shifting project,” large” refers to a multinational corporation that has consolidated global revenues in excess of EUR 750m (c. AED 3.15 bn)
UAE CT will not apply on an individual’s salary and other employment income (whether received from the public or private sector)
Business income earned under a commercial license will be within the scope of UAE CT
UAE CT will generally apply to income earned from activities carried out under a freelance license / permit, albeit no CT will be payable unless the annual net income of the freelance professional exceeds AED 375,000.
Interest and other income earned by an individual from bank deposits or saving schemes will not be subject to UAE CT
The CT liability will be calculated as follows:
Free zone businesses will be subject to UAE CT, but the UAE CT regime will continue to honour the CT incentives currently being offered to free zone businesses that comply with all regulatory requirements and that do not conduct business with mainland UAE
A business established in a free zone will be required to register and file a CT return
The UAE CT treatment that will apply to businesses in free zones will be the same across all free zones
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