Corporate Tax Services
Corporate Tax in UAE
The UAE Ministry of Finance has implemented a new Corporate Tax on business profits, which became effective on June 1, 2023. This tax reform is aimed at supporting small and medium enterprises by introducing a starting statutory tax rate of 9% on corporate profits exceeding AED 375,000 ($102,000). However, profits below this threshold will be exempt from taxation. All eligible companies in the UAE are required to comply with the corporate tax regulations, including filing annual tax returns and maintaining proper accounting records according to the relevant laws and regulations.
The introduction of the corporate tax in the UAE is part of the country’s efforts to achieve its strategic goals and expedite its growth and transition. With the UAE’s extensive network of double tax treaties, having a competitive corporate tax structure that aligns with international norms will strengthen the UAE’s position as a leading business and investment destination. Leveraging best practices from around the world, the UAE Corporate Tax Code incorporates well-established and respected concepts. As a result, the UAE Corporate Tax Law is designed to be clear in its implications and easily comprehensible.
Effective date
The Corporate Tax (CT) will be applicable to financial years beginning on or after June 1, 2023.
For companies that follow a fiscal year starting on June 1, 2023, and ending on May 31, 2024, the CT will come into effect from June 1, 2023. These companies are expected to file their first tax return towards the end of 2024.
On the other hand, companies that follow a calendar year starting on January 1, 2023, and ending on December 31, 2023, will be subject to CT starting from January 1, 2024. The filing of tax returns for these companies is likely to be due around mid-2025.
The Goals of the Corporate Tax
- Enhancing the UAE's reputation as a world-class business and investment destination.
- Transparency in taxation and avoiding unfavorable tax consequences.
- Achieving the UAE's strategic goals by accelerating its development and transformation.
- Encouraging accountability by enforcing effective tax practices.
Corporate Tax Rate in UAE
The Corporate Tax in UAE will be imposed at a primary rate of 9% on Taxable Income that exceeds AED 375,000. Any Taxable Income below this threshold will be exempt from Corporate Tax and subject to a 0% tax rate. The calculation of Corporate Tax will be based on the amount of Taxable Income in the following manner:
1. Resident Taxable Persons
- Tax rate of 0% for taxable income up to AED 375,000 (to be confirmed in a Cabinet decision)
- For taxable income exceeding AED 375,000, the corporate tax rate is 9%
2. Qualifying Free Zone Persons
- Qualifying income is subject to a 0% corporate tax rate
- If the taxable income does not qualify as Qualifying Income, it will be taxed at 9%
Exempt Income
The following income shall be in general exempt from income Tax:
- Dividend income earned by UAE company from its qualifying shareholdings (to be defined in the law)
- Capital gains
- Profits from group reorganization
- Profits from Intra-group transactions
No withholding tax will be imposed on domestic and cross-border payments in the UAE.
Regarding the exempt income scheme, it is expected that the Law will incorporate a participation exemption or similar principles that are commonly observed in international markets. Businesses will be required to assess whether they fulfill the prescribed conditions, if any, to qualify for the exempt income scheme.
Free Trade Zones
The UAE acknowledges its commitment to businesses registered in Free Trade Zones, provided that these businesses do not engage in transactions with the mainland. Such businesses will be subject to a zero percent tax rate or may qualify for exemption until the designated holiday period ends. All free zones are required to file an annual Corporate Tax return.
Businesses that have operations in both the Mainland UAE and Free Trade Zones, as well as those operating under the dual license scheme, should carefully evaluate the impact on their operating model.
The UAE has adopted the OECD Transfer Pricing Rules, which now apply within the country. All companies are required to adhere to these rules and fulfill the associated documentation requirements. The application of transfer pricing rules is no longer limited to cross-border transactions and may also extend to domestic transactions.
Previously, remuneration for intercompany sales and financing services within UAE groups was not a primary concern, as these transactions would often be eliminated during financial consolidation.
However, the adoption of transfer pricing rules changes the landscape significantly. Intercompany transactions must now be conducted at arm’s length, and businesses should maintain appropriate documentation to support these transactions. It is essential for businesses to review their existing arrangements and assess the impact on both cross-border and domestic transactions.
Corporate Tax Consultant in UAE
At MARKEF, we recognize that each business has unique goals, strategies, and requirements. Therefore, we offer personalized corporate tax solutions tailored to our clients’ specific needs.
Our experienced corporate tax consultants in the UAE provide comprehensive advisory services. We assist our valued clients with tasks such as Corporate Tax Registration, filing CT returns, and staying updated on the latest regulations issued by the Federal Tax Authority. By staying compliant, we help our clients avoid CT fines and penalties.
Our exceptional services have earned us high recommendations from clients across various industries, particularly for Corporate Tax Services in the UAE. If you require assistance or have any queries related to Corporate Tax, we invite you to contact MARKEF today. You can also visit our office for further clarifications.
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MARKEF is a leading Accounting Firm offering wide range of services including Accounting and Bookkeeping, Audit and Assurance, VAT and Corporate Tax, Business Consulting, Management Consulting, and Business Setup Services in Dubai and across United Arab Emirates.
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