The introduction of the new corporate tax in the United Arab Emirates (UAE) has created a significant shift in the tax landscape for businesses operating within the country. In this blog, we will delve deeper into the intricacies of the UAE corporate tax, addressing key questions and providing valuable insights to help businesses navigate this new tax regime.
1. What is corporate tax in the UAE?
Corporate tax is a form of direct tax levied on the net income or profit of corporations and other business entities. It is also commonly known as ‘Corporate Income Tax’ or Business Profits Tax. In simple words, it is a tax levied on the net profit made by businesses. It requires companies to pay a certain percentage of profit as tax.
2. Who should pay corporate tax in the UAE?
All businesses whose taxable profit (net) exceeds 375,000 AED fall under the purview of corporate tax and are required to pay a certain percentage of net profit as corporate tax.
3. What is the rate of corporate tax in the UAE?
The corporate tax rate in the UAE is 9% of the net profit made by businesses. However, to support small businesses and start-ups, the corporate tax rate is 0% if the net profit is up to 375,000 AED.
4. What is the date of implementing the federal corporate tax in the UAE?
The implementation of the corporate tax is effective from the financial year starting on or after 1st June 2023.
5. When was the corporate tax law released by the authorities?
The corporate tax law was released by the authorities on 9th December 2020. The UAE corporate tax law, known as ‘Federal Decree-Law no. 47 of 2022,’ is available for download on the Ministry of Finance website.
6. What are the businesses or incomes that are exempt from corporate tax?
Certain types of businesses or incomes are exempt from corporate tax in the UAE. Here is a list of companies or income categories that are exempt:
● Individuals: Personal income from employment, real estate, investments in shares, and other non-business-related income is exempt from corporate tax.
● Foreign investors not conducting business in the UAE are not subject to corporate tax.
● Corporate tax incentives continue to be offered to free zone businesses that comply with regulatory requirements.
● Capital gains and dividends received by UAE businesses from qualifying shareholdings are exempt from corporate tax.
● Qualifying intragroup transactions and restructurings are also exempt.
7. How is corporate tax calculated in the UAE?
Corporate tax in the UAE is calculated at 9% of the net profit shown in the company’s financial statements. The 9% corporate tax rate applies only if the taxable net profit exceeds 375,000 AED. Net profit up to 375,000 AED is taxed at 0%.
Conclusion:
The new corporate tax in the UAE signifies a significant change for businesses, demanding a proactive and informed approach to compliance. By partnering with Omega Business and Management Consultancy, you gain access to a dedicated team of experts who empathize with your challenges and provide personalized solutions. Let us help your business smoothly navigate the corporate tax era, ensuring compliance and unlocking opportunities for growth. Connect with Omega today, and let’s embark on this journey together.