Corporate Tax in UAE : Rates, Rules and Consent | 2023

Every country constantly passes new laws in order to boost its growth and accelerate its economy. The United Arab Emirates is one of these countries, where a new law has just been passed. Federal Decree- Law No. 47 of 2022 on Taxation of Corporations and Businesses establishes a corporate tax on a firm’s net earnings. His Highness Sheikh Mohamed bin Zayed Al Nahyan, President of the United Arab Emirates, has issued the Decree- Law. Beginning with their first financial year that begins on or after June 1, 2023, all enterprises need to abide by this regulation.

The nation’s status as a major hub for commerce and investment will enhance with the relinquishment of this UAE corporate duty law. Commercial income tax will speed up the country’s achievement of its strategic objectives. It demonstrates that the country will in no way embrace fraudulent duty practices.

What are the corporation taxes in the UAE set at?
Corporate tax in UAE has been established to ensure fair practice. For individuals with taxable inflows up to AED 375,000, the CT is 0% while for those with inflows over that threshold, it’s 9%. An alternate duty rate, set at 15% of commercial profit, will apply to large enterprises like big MNCs that meet the government’s norms.

Corporate tax in Free Zones: What are the rules?
A qualifying free zone person will be subject to it at 0% on qualifying income and at 9% on taxable income that’s not, in agreement with the legislation, considered qualifying income. Thus Dubai freezone company setup is beneficial for entrepreneurs.

Who’ll be covered by the tax law?
All business operations conducted in the UAE after acquiring a licence are subject to UAE corporate tax. This covers all types of licences, including the freelancing licence, that are necessary for you to conduct business lawfully in Dubai. According to government regulations,” qualifying free zone persons” will be needed to pay corporate taxes at the forenamed rates.

Who isn’t needed to pay corporate tax?
The new UAE corporation tax does not apply to companies that depend on resource exploitation. Capital earnings from qualified intra-group deals, qualifying reorganisations, and qualifying ownership will also be free from corporate duty. CT doesn’t apply to individual stipends or other benefits earned at work. In addition, it has been determined to exempt real estate-related interest and income from CT.

Kindly note that it is essential to get registered for corporate tax with the Federal Tax Authority even if you are exempt from paying CT.

Tax groups: what are they?

After taking FTA permission, corporations with several UAE branches may be categorised as a” Tax Group.”Intra-company trades are duty-free in situations when there’s a tax group. For tax purposes, they’re treated as a single commodity. When posting their fiscal statements, they must use the same account rules and financial year. Two or more persons must meet the legal conditions in order to form a tax group.

The fact that an exempt person or a qualified free zone can not be a part of the duty group should be emphasised. Power, rights, and annuity may be held directly or laterally through subsidiaries.

What steps must be taken to register, file, and pay company taxes?
Following are the steps that must be followed in order to pay UAE commercial duty

1. All enterprises, whether subject to taxation or not, must acquire a company tax enrollment number.

2. Taxable parties need to submit a commercial tax return. This must be done within nine months after the end of the tax period.

3. Nonetheless, you must pay both VAT and CT independently. In the UAE, both taxes, which are wholly separate from one another, are still in place.

4. Neither the VAT nor the excise duty will be abolished in the country as a result of the adoption of CT. The tax will apply to all of the Emirates in the United Arab Emirates. It’ll be favourable to comprehend the rules and every other aspect of your corporation when applying for the CT.

5. Everyone has been prompted by the Federal Tax Authority to review the company tax law information and other supporting documents posted on the sanctioned government websites.

The same might be used to assess the situation and determine if your business must pay pot duty or not.

6. Everyone should constantly check the websites or contact us to be informed about any updates or additions to the law.

What RadiantBiz services can you use to support your corporate tax registry?
Our team of accounting and tax specialists will make sure that your business complies with all legal necessities since they’re knowledgeable about and familiar with UAE compliance and accounting legislation. The tax legislation is presently being developed. The laws that were preliminarily drafted have experienced significant changes as a result of this nonstop process, and more changes will come. It might be difficult to stay on top of this evolving legislation.