The Ministry of Finance of the UAE manages and develops the financial resources of the federal government. Through effective fiscal policies and both local and international relations, they ensure the development, integrity, and sustainability of the fiscal system in line with best practices. To position the UAE as a leading global hub for business and investment, the ministry has introduced a new corporate tax. This initiative aims to enhance the UAE’s development and transformation, helping to achieve its strategic objectives.
Corporate tax in the UAE is a direct tax imposed on the net income or profit of corporations and other businesses. The UAE has recently introduced corporate tax to diversify its revenue sources.
All businesses, including corporations and branches of foreign companies operating in the UAE, are subject to corporate tax. However, there are exemptions for certain entities, such as those operating in free zones under specific conditions.
The standard corporate tax rate in the UAE is 9% on net income exceeding a certain threshold. Profits below the threshold may be taxed at a lower rate or exempt.
The corporate tax law in the UAE will come into effect from June 1, 2023. Businesses will need to comply with the new tax regulations from this date onwards.
Yes, the UAE offers exemptions and incentives under the corporate tax law. Certain sectors and businesses, such as those in free zones or involved in natural resource extraction, may qualify for tax exemptions or reduced rates.
Businesses should start by understanding the new tax laws and how they apply to their operations. They should also ensure their accounting systems are capable of handling the new tax requirements and consider consulting with tax professionals for compliance and optimization strategies.
Businesses must maintain accurate financial records, including income statements, balance sheets, and supporting documents for all transactions. These records should be kept for a minimum period specified by the tax authorities.
Corporate tax returns in the UAE are filed electronically through the Federal Tax Authority (FTA) portal. Businesses must submit their returns annually, detailing their income, expenses, and tax calculations.
Penalties for non-compliance can include fines, interest on unpaid taxes, and legal consequences. It is crucial for businesses to adhere to the regulations to avoid such penalties.
For more information about corporate tax in the UAE, you can visit the Federal Tax Authority (FTA) website or consult with a tax professional who specializes in UAE tax laws.
A corporate tax is a tax imposed on the income or capital of a corporation and other entities. These taxes are levied on a business’s taxable income. Similar to how individuals pay income tax, corporations pay corporate tax. Many countries implement these taxes at both national and state levels.
The corporate tax rate in the UAE will be 9 percent, with some exceptions. This tax will apply to businesses with a net income or taxable income of AED 375,000 or more. However, small businesses whose taxable income does not exceed AED 375,000 will continue to have a tax rate of 0%.
Yes, the United Arab Emirates has introduced a federal corporate tax. This tax is imposed on the net income or profit of corporations and other businesses operating within the country. The move aims to diversify the UAE’s revenue sources and align its fiscal policies with global standards. The standard corporate tax rate is set at 9% on net income above a specified threshold, with certain exemptions and incentives available for specific sectors and businesses, such as those in free zones or involved in natural resource extraction. The corporate tax law came into effect on June 1, 2023, and businesses are required to comply with the new regulations from this date onwards.
Corporate taxes are determined by the company’s net income or taxable income, also known as net profit or earnings. This involves calculating all revenue streams and deducting expenses such as operating costs, depreciation, amortization, and interest on loans. Business management software like Tally Prime simplifies this process by providing financial reports like balance sheets and profit and loss accounts.
As per the Ministry of Finance, the updated corporate tax rates are as follows:
Additionally, large multinationals meeting specific criteria outlined in Pillar Two of the OECD Base Erosion and Profit Shifting Project will be subject to a different tax rate.
The administration, collection, and enforcement of the new corporate tax will be overseen by the Federal Tax Authority (FTA).
A foreign investor’s income gained from dividends, interest, royalties, capital gains, and other investment returns will not come under the new corporate tax.
Entities established in a free zone that meet the conditions will be classified as ‘Qualifying Free Zone Persons’ and will be subject to corporate tax at the following rates:
Foreign companies and individuals will be subjected to the new corporate tax in UAE as long as they run a business or conduct trade in the UAE in an ongoing or regular manner.
As corporate tax is levied annually, it’s important to define the ‘Tax Period’. Typically, this period aligns with the Gregorian calendar year (from January 1st to December 31st), unless the business adopts a different 12-month period for financial statement preparation. For instance, if your business follows a financial year starting from April 1st, then the tax period will be April 1st to March 31st.
If your business is registered for VAT, you’ll need to pay VAT and corporate tax separately. However, if your business isn’t VAT registered, you might still be liable for federal corporate tax.
To prepare for federal corporate tax in the UAE, follow these steps:
Tally Prime ensures your business is prepared for corporate tax and VAT compliance, facilitating a smooth transition. Its features include:
With Tally Solutions, businesses can confidently navigate the complexities of the new corporate tax regulations in the UAE. Our user-friendly software provides reliable support and guidance for compliance with tax rules, ensuring peace of mind for businesses.