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Starting in June 2023, the UAE government will impose a corporation tax on businesses, with a 9% tax rate applied to companies making more than Dh 375,000 in profit annually.
All companies and people operating under a commercial license in the UAE, as well as companies in free zones, will be subject to Corporate Tax. The UAE CT regime will continue to honor the CT benefits now being granted to qualified free zone persons that comply with all regulatory requirements and that do not conduct business in the UAE’s mainland.
Furthermore, it won’t be imposed on foreign organizations or people unless they regularly or continuously do trade or commerce in the UAE e.g.: the permanent establishment of foreign companies
A statement by the authorities said that the ‘introduction of Corporate Tax is intended to help the UAE achieve its strategic objectives and accelerate its development and transformation’.
The Tax’s Exemptions :
1. Businesses involved in the extraction of natural resources are excluded from the tax since they will continue to be subject to the present corporate taxation at the Emirate level.
2. Additionally, a UAE company’s qualified shareholdings will exempt it from paying taxes on dividends and capital gains it makes.
3. In a similar vein, if the requirements are satisfied, eligible intra-group transactions and reorganizations will not be liable to the tax.
4. An individual’s salary and other employment income, whether from the public or private sector, are exempt from corporate tax.
5. Furthermore, it won’t be assessed on interest or other income that a person receives from bank accounts or savings plans.
6. The income received by a foreign investor through dividends, capital gains, interest, royalties, and other investment returns is excluded.
All Businesses will be liable to UAE Corporate Tax beginning with their first fiscal year that begins on or after June 1, 2023, by UAE Federal Decree-Law No. 47 of 2022 on Taxation of Corporations and Businesses (“Corporate Tax Law”). The new CT system will go into effect for accounting periods starting on or after June 1, 2023. This gives organizations with a December year-end a full year to plan and evaluate the impact before the change goes into effect. As per the Ministry of Finance, CT rates are 0 percent for taxable income up to AED 375,000 and 9 percent for taxable income above AED 375,000 would be applied. A different tax rate (not yet specified) for large multinationals that meet specific criteria set concerning ‘Pillar two’ of the OECD Base Erosion and Profit Shifting Project.
