Corporate Tax in UAE
The Ministry of Finance has declared the implementation of a new federal corporate tax of 9% in the UAE. This Tax will be levied on business profits above a threshold of AED 375,000 and will come into effect from the start of the financial year on 1st June 2023. In the UAE, corporate tax compliance is mandatory for all companies that are subject to corporate taxation. Companies are required to file annual tax returns and maintain proper accounting records by the applicable tax laws and regulations. If you are a business owner in the United Arab Emirates (UAE). In that case, you know that navigating the complex and ever-changing landscape of corporate tax laws can be a daunting task.
It is where a reliable corporate tax consultant in UAE comes in to assist you with all your tax-related needs. Our firm has a team of experienced and knowledgeable corporate tax consultants who can help you manage your corporate tax obligations effectively, allowing you to focus on growing your business.
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Corporate Tax Registration in Dubai
Every individual or entity subject to taxation, including those in free zones, must register for a Corporate Tax and obtain a unique Corporate Tax Registration Number.
- The Federal Tax Authority may also require some exempt individuals or entities to register for Corporate Tax.
- Taxable individuals or entities must file a Corporate Tax return for every taxable period, which must be done within nine months from the end of that period.
- The deadline for payment of any Corporate Tax owed for that period is also generally nine months from the end of the relevant period.
Corporate Tax Rate in UAE
The UAE has one of the Middle East’s most competitive Corporate Tax rates. Entrepreneurs may seek Corporate Tax advisory services in the UAE to better comprehend the applicable Corporate
Tax rate to their business model. Corporate Tax in the UAE is levied on businesses’ annual taxable Income as follows:
- The Corporate Tax rate is set at 9% on Taxable Income that exceeds AED 375,000, while
- Taxable Income that falls below this threshold is not subject to Corporate Tax and enjoys a 0% rate
Who is Subject to Corporate Tax in the UAE?
In broad terms, Corporate Tax applies to the following entities or individuals, collectively referred to as “Taxable Persons”:
- Companies and other juridical persons incorporated or effectively managed and controlled within the UAE.
- Natural persons (individuals) who conduct a business or business activity within the UAE, as specified in a forthcoming Cabinet Decision.
- Non-resident juridical persons (foreign legal entities) with a Permanent Establishment in the UAE, as defined in Section 8 of the relevant legislation.
- In addition, juridical persons established in a UAE Free Zone are considered Taxable Persons and must comply with the requirements outlined in the Corporate Tax Law; however, If a Free Zone Person meets the criteria to be classified as a Qualifying Free Zone Person. In that case, they may benefit from a 0% Corporate Tax rate on their Qualifying Income, as detailed in Section 14.
- Non-resident persons without a Permanent Establishment in the UAE or those earning UAE-sourced Income not related to their Permanent Establishment may be subject to Withholding Tax, which is collected at source by the payer on behalf of the income recipient. Withholding Tax is a type of Corporate Tax applicable to cross-border payments of dividends, interest, royalties, and other forms of Income and is levied at a rate of 0%.
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How is a Taxable Person Subjected to Corporate Tax?
The Corporate Tax Law imposes taxes on Income based on both a residence and source basis, consistent with the tax regimes of many nations. The applicable basis of taxation is contingent on the classification of the Taxable Person.
A “Resident Person” is liable for taxes on Income derived from domestic and foreign sources, i.e., a residence basis.
In contrast, a “Non-Resident Person” is taxed solely on Income obtained from sources within the UAE, i.e., on a source basis.
For Corporate Tax purposes, the residence determination is not based on where an individual resides or is domiciled but on specific factors specified in the Corporate Tax Law. If a person does not satisfy the conditions for either a Resident or a Non-Resident person, they will not be a Taxable Person and thus will not be subject to Corporate Tax.
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Required Documents for Corporate Tax Registration in UAE
Businesses must provide certain documents to register for Corporate Tax in the UAE. The process for registration can be completed online. The following documents must be submitted for Corporate Tax Registration in the UAE:
- A copy of the Trade License that has not expired
- A passport copy of the owner/partners who own the license that has not expired
- An Emirates ID of the owner/partners who own the license that has not expired
- A Memorandum of Association (MOA) or a Power of Attorney (POA)
- Contact details of the concerned person, including their mobile number and email
- Contact details of the company, including the complete address and P.O. Box.
- The Corporate Tax Period.
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Corporate Tax Exemption in UAE
The following entities are subject to corporate tax exemption
1. Automatically exempt from corporate Tax:
- Government entities
- Government-controlled entities specified in a Cabinet Decision
2. Entities may be exempt if they meet certain conditions and notify the Ministry of Finance::
- Extractive businesses
- Non-extractive natural resource businesses
3. Entities may be exempt if listed in a Cabinet Decision:
- Qualifying public benefit entities
4. Entities may be exempt if they apply to and receive approval from the Federal Tax Authority, subject to certain conditions:
- Public or private pension and social security funds
- Qualifying investment funds
- Wholly-owned and controlled UAE subsidiaries of a government entity, a government-controlled entity, a qualifying investment fund, or a public or private pension or social security fund.
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Avail Corporate Tax Services in the UAE with our top Corporate Tax Consultant now
Implementing corporate Tax in the UAE is expected to change the country’s regulatory environment significantly. As a result, businesses must be well-prepared to adhere to the new taxation rules. Our Corporate Tax advisory services in the UAE can help businesses understand the implications of corporate Tax, assess their eligibility and exemptions, and develop tax planning strategies to optimize compliance and minimize tax liabilities. By leveraging their expertise and guidance, companies can confidently navigate this new era of corporate taxation. To assist with this process, corporate tax consultants in Dubai, such as Farahat & Co., are available to provide tax advisory and assessment services.
Our range of corporate tax services in the UAE includes:
- Assessing and advising on the tax implications for the company,
- Determining its eligibility for corporate Tax and any exemptions available to mainland, offshore, and free zone businesses.
- Analyzes the possibility of tax grouping for companies to take advantage of potential tax benefits.
- Guide restructuring group companies, including foreign subsidiaries and branches, to optimize tax planning strategies.
- Offer advice on foreign tax credits, withholding Tax, and deduction of expenses and interest to help businesses navigate the complexities of corporate taxation in the UAE.
- Registering the business with the Federal Tax Authority to obtain a Tax Registration Number (TRN).
- Determining and computing the corporate taxable Income based on the company’s corporate structure.
- Preparing and filing the tax returns with the tax authority.
- Deregistering the TRN if the company ceases operations or is no longer required to pay taxes.
By utilizing these corporate tax services in the UAE, companies can ensure they are fully prepared to comply with the new regulatory landscape and minimize their tax liabilities.
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