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What is Corporate Tax?

Corporate Tax is a form of direct tax levied on the net income of corporations and other businesses. Corporate Tax is sometimes also referred to as “Corporate Income Tax” or “Business Profits Tax” in other jurisdictions. The CT Law will apply to Taxable Persons for financial years commencing on or after 1 June 2023. UAE CT will be applicable across all Emirates and will apply to all business and commercial activities alike, except for the extraction of natural resources, which will continue to be subject to Emirate level taxation.

UAE Corporate Tax will be applicable at the following rates:

Taxable Income

UAE CT Rate

Table income not exceeding AED 375,000

0%

Qualifying Income of a Qualifying Free Zone Person

0%

Taxable income Exceeding AED 375,000

9%

Non-Qualifying Income of a Qualifying Free Zone Person

9%

Our Corporate Tax Services

Corporate Tax Registration

For a seamless corporate tax registration process, rely on our expert team for efficient and hassle-free assistance.

Corporate Tax Impact Study

Understanding Corporate Tax's true impact is crucial for minimizing liabilities, maximizing savings, and ensuring business success.

Corporate Tax Return Filing

Seeking assistance with Corporate Returns? Our team aids in document preparation, tax liability calculation, and compliance.

Who is subject to Corporate Tax?

Corporate Tax applies to the following “Taxable Persons”:

UAE companies and other juridical persons that are incorporated or effectively managed and controlled in the UAE.
Natural persons (individuals) who conduct a Business or Business Activity in the UAE as specified in a Cabinet Decision to be issued in due course.
Non-resident juridical persons (foreign legal entities) that have a Permanent Establishment in the UAE (which is explained under Section 8).
Juridical persons established in a UAE Free Zone are also within the scope of Corporate Tax as “Taxable Persons” and will need to comply with the requirements set out in the Corporate Tax Law. However, a Free Zone Person that meets the conditions to be considered a Qualifying Free Zone Person can benefit from a Corporate Tax rate of 0% on their Qualifying Income (the conditions are included in Section 14).

Features of Corporate Taxation in UAE

UAE Corporate Tax Filing & Deadlines

The corporate tax period changes based on when the company’s financial year comes to an end.

Expert Corporate Tax Consultants in Dubai:
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ACL tax consultants, an experienced corporate tax advisors in Dubai, help businesses all over UAE with expert guidance on corporate tax matters. We have a proficient team of accounting professionals who possess extensive knowledge of the latest accounting practices and regulations in the UAE. Recognizing the unique financial and accounting requirements of each business, we deliver tailored solutions that specifically address these needs!

With ACL as your trusted partner, businesses can rely on us for comprehensive financial, accounting assistance, and account outsourcing & bookkeeping services enabling them to thrive in the UAE market. For further information about corporate tax laws in the UAE, Dubai’s corporate tax rates, as well as the process to register for corporation tax online, please get in touch with us today!

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Frequently Asked Questions

Will individuals be subject to UAE Corporate Tax?

Only individuals who engage in a business or business activity as per a Cabinet Decision that will be issued in due course will be subject to UAE CT. Individuals engaged in other activities will generally be outside the scope of the CT regime.

Who is exempt from UAE Corporate Tax?

The following persons are exempt from UAE CT, either automatically or by way of application:

The UAE Federal and Emirate Governments and their departments, authorities and other public institutions;
Wholly Government-owned companies that carry out a mandated activity, and that are listed in a Cabinet Decision;
Businesses engaged in the extraction of UAE natural resources and related non-extractive activities that are subject to Emirate-level taxation after meeting certain conditions;
Public Benefit Entities that are listed in a Cabinet Decision;
Investment Funds that meet the prescribed conditions;
Public or private pension or social security funds that meet certain conditions; and
UAE juridical persons that are wholly-owned and controlled by certain exempted entities after meeting certain conditions.

When will the UAE Corporate Tax regime become effective?

The UAE CT regime will become effective for financial years starting on or after 1 June 2023.

Examples:

A business that has a financial year starting on 1 July 2023 and ending on 30 June 2024 will become subject to UAE CT from 1 July 2023 (which is the beginning of the first financial year that starts on or after 1 June 2023).
A business that has a financial year starting on 1 January 2023 and ending on 31 December 2023 will become subject to UAE CT from 1 January 2024 (which is the beginning of the first financial year that starts on or after 1 June 2023).

What is a Tax Period?

Given CT is imposed on an annual basis, it is necessary to specify the “Tax Period”. The Tax Period will normally be the Gregorian calendar year (i.e. from 1 January to 31 December), unless the business applies a different 12-month period for preparing its financial statements.

Will small businesses be given any UAE Corporate Tax relief?

In addition to a 0% CT rate for taxable income up to and including AED 375,000, small businesses with revenue below AED 3 Million can claim ‘small business relief’ and be treated as having no taxable income during the relevant Tax Period and may be subject to simplified compliance obligations. To claim small business relief, an election must be made to the FTA.

Are freezone businesses liable to pay corporate tax?

Juridical persons established in a UAE Free Zone are also within the scope of Corporate Tax as “Taxable Persons” and will need to comply with the requirements set out in the Corporate Tax Law. However, a Free Zone Person that meets the conditions to be considered a Qualifying Free Zone Person can benefit from a Corporate Tax rate of 0% on their Qualifying Income (the conditions are included in Section 14).

Will a group of UAE companies be able to form a Tax Group for UAE CT purposes?

UAE companies can apply to form a Tax Group and be treated as a single taxable person if the UAE parent company (directly or indirectly) holds at least 95% of the share capital and voting rights of each of the companies. Example: Company A owns, 20% of company B, and 100% of Company C. Company C owns 80% of the shares of Company B. Because Company A indirectly owns 100% of the shares of Company B (80% via Company C), it can form a Tax Group with both Company B and Company C. To form a Tax Group, neither the parent company nor any of the subsidiaries can be an exempt person or a Free Zone entity benefitting from the 0% CT rate, and all companies must use the same financial year and prepare their financial statements using the same accounting standards.

What records should I keep for UAE CT purposes?

Taxpayers are expected to prepare and maintain financial statements for the purposes of calculating their taxable income, and should maintain all documents and records that support the information in the CT return or in any other filing made with the Authority. Exempt persons are required to maintain all records to support their exempt status.

How long must I keep my records for Corporate Tax purposes?

Records and documents should be kept for at least seven years following the end of the relevant Tax Period.

What standards must be used to prepare financial statements?

For UAE CT purposes, the financial statements of UAE entities and other businesses should be prepared in accordance with accounting standards accepted in the UAE. International Financial Reporting Standards (IFRS) is the most frequently used accounting standard in the UAE.

What expenditure will be deductible for the purposes of calculating taxable income?

In principle, all legitimate business expenses incurred to derive taxable income will be deductible, although the timing of the deduction may vary for different types of expenses and the accounting method applied. For capital assets, expenditure would generally be recognised by way of depreciation or amortisation deductions over the economic life of the asset or benefit. Expenditure that has a dual purpose, such as expenses incurred for both personal and business purposes, will need to be apportioned with the relevant portion of the expenditure treated as incurred wholly and exclusively for the purpose of the taxable person’s business.

Will the UAE Corporate Tax regime allow prior year tax losses to reduce taxable income?

Tax losses can, subject to certain conditions, be offset against the taxable income of future periods, up to a maximum of 75% of the taxable income in each of those future periods. Any excess (unused) tax losses can be carried forward and used against taxable income of future Tax Periods indefinitely.

Example
A taxpayer has taxable income of AED 100,000 and carried forward losses of AED 125,000. It can offset (75% x AED 100,000) = AED 75,000 of its losses carried forward in the relevant Tax Period, reducing its taxable income to AED 25,000.

The amount of tax losses available for carry forward to subsequent Tax periods would reduce to AED 50,000 (AED 125,000 – AED 75,000).

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