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Dealing with UAE corporate tax processes can be tough and challenging, but that’s why our team is here to assist you. We stay updated on the latest corporate tax regulations and ensure that all your filings comply with the most recent policies, helping you avoid penalties.
To comply with the UAE’s new corporate tax scheme, every business must:
- Register for corporate tax starting from June 2023.
- Maintain accounting records that meet required standards (e.g., IFRS).
- File a corporate tax submission with the Federal Tax Authority.
- Even if your business isn’t liable for corporate tax, registration and compliance are mandatory to determine tax exemption eligibility.
Corporate Tax Advice
Corporate Tax Registration
Corporate Tax Returns
Corporate Tax Compliance
Ongoing Tax Advisory
Tax Audits and Dispute Resolution
How Corporate Tax Services Work in the UAE
Corporate tax services in the UAE are designed to help businesses comply with the federal corporate tax framework while managing tax obligations efficiently. Professional guidance ensures accurate registration, proper reporting, and compliance with evolving tax regulations.
The process typically begins with assessing corporate tax applicability based on business activity and taxable income. Once eligibility is determined, businesses proceed with corporate tax registration and ongoing compliance planning. This includes maintaining proper records, preparing corporate tax returns, and addressing regulatory requirements in line with UAE tax laws.
With expert corporate tax support, businesses can reduce compliance risks, avoid penalties, and ensure their tax obligations are managed correctly.
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Corporate Tax in UAE
Corporate tax in the UAE is applied to the taxable income (net profit) of businesses operating within the country. The new corporate tax policies began on June 1, 2023, with most businesses becoming fully taxable by January 1, 2024.Â
Historically, the UAE was favored by entrepreneurs and investors due to its 0% corporate tax, stable political environment, strategic location, and excellent business infrastructure.Â
However, as the UAE’s economy, the fifth-largest in the Middle East diversifies away from oil dependency, corporate tax has been introduced to support its economic growth.
Who Pays Corporate Tax UAE?
Under the new corporate tax regime in the UAE, virtually all companies, including those in free zones, will be subject to corporate tax. Specific exemptions exist but are limited. According to the UAE Ministry of Finance, the following entities are liable to pay corporate tax:
- Corporations and legal entities based in the UAE or those with primary management and operations in the UAE.
- Individuals conducting business activities in the UAE.
- Foreign legal entities with a Permanent Establishment in the UAE, as defined in the Corporate Tax Law.
The new tax applies from June 1, 2023, onward, with the start of tax calculations depending on the business’s financial reporting year:
- Businesses reporting from July 1 will begin tax calculations from July 1, 2023.
- Businesses reporting from January 1 will start from January 1, 2024.
Most commercial activities within the UAE must register for and file corporate tax, with few exceptions.
How Much Is the Corporate Tax UAE?
The UAE Ministry of Finance (MOF), responsible for regulating corporate tax, has established a three-tier taxation system:
- Businesses with net yearly profit up to AED 375,000: These businesses are subject to a 0% tax rate.
- Businesses with net yearly profit above AED 375,000: These businesses will be taxed at a 9% rate.
- Large multinational companies: Those with global revenue over EUR 750 million (AED 3.15 billion) will be taxed at a minimum of 15%, in line with the OECD’s global tax standards.
Corporate Tax Registration
To register for Corporate Tax in the UAE, visit the Federal Tax Authority (FTA) website. You’ll need to fill out the required forms and submit documents such as your Emirates ID, trade license, passport, financial records, business activity details, and corporate structure. After submission, the authorities will review your application and, if approved, issue a Tax Registration Number (TRN) within 20 days. If additional information is needed, approval may take an extra 20 days. Virtuzone can assist with your application process through the FTA.
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Is Corporate Tax the Same as VAT?
When the UAE government introduced corporate tax, some businesses mistakenly equated it to VAT. However, they are distinct:
Overview of UAE Corporate Tax Exemptions and Special Cases
UAE Corporate Tax: Exempt Persons
Certain entities are exempt from UAE corporate tax, meaning they don’t need to file a tax report or pay taxes. These include:
- Government and public entities at both federal and regional levels.
- Businesses involved in the extraction or mining of natural resources, as are taxed at the Emirate level.
- Charitable and social organizations provided they register with the MOF and meet specific conditions.
- Real estate and regulated investment funds, subject to MOF approval.
- UAE government-owned companies are listed for tax exemption by a ministry-level decision.
- Public or private pension and social security funds that meet certain conditions.
UAE Corporate Tax: Exempt Income
Certain types of income may also be exempt from corporate tax, including:
- Dividends or profit distributions from UAE-incorporated or resident entities.
- Dividends from a participating interest in a foreign entity.
- Capital gains from selling shares of a subsidiary.
- Foreign exchange gains/losses or capital gains from participating interest.
- Earnings from the operation or leasing of ships or aircraft in international transport.
- Earnings by a foreign branch that opts for the ‘Foreign Permanent Establishment’ exemption.
For dividend-related tax deductions, the UAE company must generally own at least 5% of the subsidiary, though requirements vary by country.
Corporate Tax for Free Zone Persons
Entities in UAE Free Zones can qualify for a 0% tax rate if they:
- Earn “Qualifying Income”
- Maintain economic substance in the Free Zone
- Do not opt for standard tax rates
- Comply with transfer pricing rules
Qualifying income includes transactions with other Free Zone entities and income from specified activities. Non-qualifying income must not exceed 5% of total revenue or AED 5 million.
Corporate Tax for Freelancers
Freelancers will fall under corporate tax once their annual revenue reaches AED 1 million. To operate, freelancers must obtain a professional license.
Corporate Tax for Groups
Two or more entities can form a ‘Tax Group’ and be treated as one entity for tax purposes if:
- They are resident legal entities with the same fiscal year and accounting practices.
- The parent company owns at least 95% of the subsidiary’s equity, voting rights, earnings, and assets.
A Tax Group cannot include Exempt Entities or Qualifying Free Zone Entities. The parent company must prepare consolidated financial statements for all subsidiaries in the group.
Tax Income Deductions and Exemptions in the UAE
Tax Income Deductions
In the UAE, businesses can deduct expenses related to generating taxable revenue, subject to specific limitations and accounting methods. Key deductible expenses include:
- Charitable Donations: Contributions to approved charities.
- Interest Expenses: Deductible, with limits if Net Interest Expenditure exceeds AED 12 million.
- Royalty Payments: Payments to foreign group companies at arm’s length.
- Irrecoverable Input VAT: VAT that cannot be reclaimed.
- Owner/Director Remuneration: Deductible within market rate limits.
- Management Fees: Paid to affiliated entities, adhering to transfer pricing rules.
- Future Tax-Deductible Losses: Losses reported for future deductions.
- Employee Entertainment Costs: 50% of these costs are deductible.
- Doubtful Debts and Government Fees: Deductible expenses.
Additional Tax Exemptions
Certain incomes may be exempt from tax. This includes dividends from UAE or foreign companies, capital gains from selling subsidiary shares, and foreign exchange gains or losses.Â
Earnings from international transport and profits from foreign branches may also qualify for exemptions or credits.
Tax Deduction for Companies with Foreign Branches
Foreign branches in the UAE can either claim a foreign tax credit up to the lesser of the foreign tax paid or the UAE Corporate Tax due or apply for an exemption on profits made by their foreign branches.
Corporate Tax Services in Dubai
Corporate tax services offer essential support to businesses to ensure compliance with UAE corporate tax regulations and optimize tax efficiency. These services are designed to help you navigate the complexities of corporate taxation and manage your tax obligations effectively. Key services include:
- Corporate Tax Registration: Assistance with the registration process to ensure your business meets all requirements for corporate tax obligations.
- Tax Compliance: Ongoing support to maintain compliance with corporate tax regulations, including the preparation and submission of tax returns and accurate record-keeping.
- Tax Planning and Optimization: Strategic advice to minimize tax liabilities and enhance financial efficiency through effective tax planning.
- Tax Audit Support: Expert guidance and support during corporate tax audits to facilitate a smooth audit process and address any issues that may arise.
- Tax Advisory Services: Tailored advice on corporate tax issues, including structuring, cross-border taxation, and other complex tax matters to ensure optimal tax strategy and compliance.
FAQs
Our team of experts fields common questions from people all over the globe about corporate tax in the UAE.
