Running a business in the United Arab Emirates has been very appealing because of the region’s tax-friendly policies and the vision to become the world’s largest business hub. But corporate tax now looms large before businesses in this country. As of today, most businesses remain unclear on the implications of the new tax imposed on them. To remain compliant and avoid fines, knowing the rules, rates, and exemptions is vital. Here, you will find the basic know-how of the corporate tax in the UAE.
Tax Gian provides expert tax guidance, tax consultancy, and tax services to its clients all over the UAE.
What is Corporate Tax in UAE?
Corporate tax is the direct tax collected on the business’s taxable income. The Government of the United Arab Emirates enforced this tax law through Federal Decree-Law No. 47 of 2022. Later, a modification was issued through Federal Decree-Law No. 60 of 2023. Moreover, new updates about corporate tax can be seen these days. This tax affects all businesses based in the UAE, including companies operating in the free zones, banking institutions, and real estate businesses.
When Did the Corporate Tax Regime Begin in UAE?
The corporate tax implementation date is;- June 1, 2023- For companies with a financial year beginning on or after this date.
- January 1, 2024 – For others whose financial years are different from the date as mentioned earlier.
What is the Purpose of Corporate Tax in UAE?
Corporate tax was launched by the UAE to:- Ensure its position in the global business hub.
- Develop and diversify the economy of the country.
- Align with the international standards on tax transparency.
Who Has to Pay Corporate Tax in UAE?
Corporate tax applies to:- Companies operating in the United Arab Emirates have a commercial license.
- Free zone enterprises (0% for QFZP)
- Foreign enterprises carrying on ordinary trade or business in the UAE.
- Banking institutions.
- Real estate managing, construction and brokerage enterprises.
Who is Not Subjected to CT in UAE?
- Some entities and persons are not subject to it, such as:
- Business enterprises in natural resource extraction (since they are covered by the current Emirate-level tax laws).
- Qualifying shareholdings (dividends and capital gains arising from eligible investments).
- Intra-group transactions (if they are subject to legal requirements).
- Individual salaries and personal investments (such as income from real estate or bank deposits).
- Foreign investors’ earnings (dividends, interest, and royalties from UAE businesses).
Corporate Tax Rates in UAE
The UAE corporate tax rates are:- 0% – For taxable income up to AED 375,000 and on the Qualifying Income for Qualifying Free Zone Persons
- 9%– For taxable income above AED 375,000 and on the Non-Qualifying Income of Qualifying Free Zone Persons
- 15% or more– For large multinational companies under OECD’s Pillar Two framework.
Domestic Minimum Top-up Tax (DMTT)
Starting January 1, 2025, large multinational businesses earning €750 million or more in global revenue will be subject to a minimum 15% tax under international tax guidelines.
Tax Registration and Compliance
Businesses must register for corporate tax based on their trade license issuance date. Failure to register on time could result in a penalty of AED 10,000.
For Resident Businesses:
Companies are required to register with the Federal Tax Authority (FTA) within deadlines issued according to their license date.
For Non-Resident Businesses:
Companies having a permanent establishment in the UAE are required to register within six to nine months of its incorporation.
Businesses having a nexus with the UAE are required to register within three months of commencing operations.
How to File Corporate Tax in UAE?
The Federal Tax Authority (FTA) is responsible for tax collection and compliance. Businesses are required to:- Register for corporate tax.
- File tax returns before the deadline becomes due.
- Pay the income according to the profits made.
Why Choose Tax Gian in UAE?
Corporate tax in the UAE is a revolution in terms of the country’s tax policies. Business owners must know how it relates to them and will avoid any fines by remaining compliant with these regulations. Our experts at Tax Gian help businesses learn and comply with CT regulations. With their knowledge of tax rates, exemptions, and filing requirements, our tax consultants help businesses streamline their tax procedures and smoothen business operations thereafter.
