Corporate Tax In Dubai and UAE

Rajinder Nagiyal

January 16, 2024

Business Setup

Corporate Tax In Dubai and UAE

Corporate tax in Dubai is a type of direct tax that is imposed or levied on the nett income or profit that businesses and other entities make from their operations. In some nations, “corporate tax” is also referred to as “business profits tax” or “corporate income tax.” On December 9, 2022, the UAE Ministry of Finance announced the introduction of corporate tax in Dubai. This tax would take effect for fiscal years beginning on or after June 1, 2023. The UAE’s corporate tax is the lowest in the world, and it eases the burden of compliance on enterprises. The federal corporate tax has been implemented in the UAE in an effort to advance the nation’s standing as a premier global centre for trade and investment and quicken the strategic goal of growth and transformation. Additionally, the idea of business taxes helps avoid detrimental tax practises and fulfil international requirements for tax transparency.

Why was corporate tax introduced in the UAE?

Taxes on business profits were implemented in the UAE for a number of significant reasons. They include:

To enhance the nation’s standing as a significant hub for commerce and investment.
To accelerate the transformation and developmental programmes in order to achieve strategic goals
To address global standards for tax transparency.
To eliminate bad tax practises from the system.
To increase its revenue from non-oil sources.

The Corporate Tax in the UAE is applicable to

All businesses and other legal entities that are incorporated, effectively managed, and controlled within the UAE.
Individuals who conduct a business or other type of business activity in the UAE are also subject to corporate tax.
Corporate tax is also levied on non-resident juridical persons who have a permanent establishment in the UAE.
Businesses that engage in real estate management, construction, development, agency, and brokerage operations.

UAE Corporate Tax Exemptions

Some companies or organisations are free from corporate tax in the UAE because of their considerable contributions to the nation’s social system and economy. These organisations are known as exempt persons, and they may include:

Those that are automatically exempt, which are:

Government entities
Organisations under government control that are listed in a cabinet decision

If the Ministry of Finance is alerted and you meet specific requirements, you are exempt. This is applicable to:

Extractive business and Non-extractive natural resource business

If you submit an exemption request to the Federal Tax Authority (FTA), if the FTA agrees to the request and certain conditions are met, the exemption may be granted.
Interest and additional revenue that a person receives from savings accounts or bank deposits.
A person’s income and additional employment revenue, whether from the public or private sector.
The income received by a foreign investor from interest, royalties, capital gains, dividends, and other investment returns.
Individual real estate investors acting in their own capacities.

UAE Corporate Tax Rate

The UAE Ministry of Finance states that the corporate tax in the UAE is as follows:

Taxable income up to AED 375,000 attracts a 0% fee.
Taxable income above AED 375,000 attracts a 9% fee.

With the introduction of corporation tax in the UAE, the majority of UAE enterprises should expect significant changes in their tax and compliance expenses, and all entities must adhere to the new tax system. This necessitates a thorough analysis of the tax implications and any modifications required to the corporate structure, operational model(s), finance and tax operations, reporting systems, legal agreements, and transfer pricing regulations. Our expert tax team at RSN will provide the help you need and address your questions about corporate tax. Contact us today.

Frequently Asked Questions

Q: Is the UAE the first nation to implement CT?

Most nations around the world, including most of those in the Middle East, have comprehensive CT regimes.

Q: Will CT take the place of VAT in the UAE?

Not at all; CT and VAT are two distinct tax kinds. Both will still be applicable in the UAE.

Q: Will I be required to pay VAT in the UAE in addition to UAE CT?

VAT and CT must be paid separately if your firm is registered for VAT. You may still be required to pay CT even if your company is not registered for VAT.

Q: What are the CT rates for Free Zone qualifiers?

For Free Zone qualifiers, the CT rate is 0% on qualifying income, while the CT rate is 9% on income that doesn’t meet the qualifying income standard.

Q: Under UAE corporate tax, is registration mandatory?

The Federal Tax Authority (FTA) is requesting that all private and public joint stock companies register for corporation tax as of May 15, 2023.