Corporate tax in Dubai: UAE ministry of finance has tax decrees issued in 2022 imposing a CT at a tax rate of 9 % for taxable business income. Corporate tax is a form of direct tax levied on the net taxable income of business profits.
The UAE CT regime will be based on global best practices IFRS, with minimum or no compliance requirements for firms.
The introduction of corporate tax will take effect for financial years beginning June 2023. The CT comply with the OECD model tax convention to implement a Global Minimum Tax, which will impact companies operating in the UAE and GCC countries from 2023.
UAE will automatically be considered one of the lowest CT taxes in the world.
Corporate tax law provides, if your business activities fall under this list, your business is qualified to be exempt from corporate tax. Nevertheless, you need to prove compliance and adhere to tax filing and bookkeeping. This will make levied on the net income at corporate tax rate of 0
In recognition of the fundamental role of free trade zones in driving the nation’s economic transformation, the existing free zone entities will be eligible to benefit from a 0 % Corporate Tax rate on qualifying income.
Under the provisions of the CT Law, Corporate Tax will not be applied to salaries or other personal income from employment, whether it is earned from work in the government, semi-governmental or private sector.
Interest and other personal income earned from bank deposits or savings programs are also not subject to Corporate Tax, as well as investment in real estate by individuals in their personal capacity.
Who is the Taxable Person in accordance with UAE Corporate Tax?
The UAE corporate tax law regime states that a Taxable Person shall be either a UAE Resident or a Non-Resident.
A Non-Resident person can be subject to CT in 3 cases:
A Resident Person shall be referred to as a “Parent Company”, can make an application to the Authority to form a Tax Group with
one or more other Resident Persons, each referred to as a “Subsidiary”
Taxable Person is subject to UAE Corporate Tax on its Taxable Income (tax on business profits) derived from the State or from outside UAE
According to the corporate tax decree; there are 5 points to qualify Free Zone person in UAE:
If residence for corporate tax derives income from both an Extractive Business [ falls under tax exemptions] and any other Business that is within within the scope of corporate tax.
The other Business shall be treated as an independent Business, and financial statements shall be kept for this Business separately from the Extractive Business. Any common expenditure shared between the Extractive Business and the other Business of the Person shall be apportioned in proportion to their Revenue in the Tax Period.
Unless such expenditure is taken into account in different proportions for the purposes of calculating the tax payable by the Person under the applicable legislation of the relevant United Arab Emirate in respect of its Extractive Business, in which case the expenditure will be apportioned in the latter proportion. The Person shall calculate the Taxable Income for its other Business independently for each Tax Period.
As business you should know that under this law a Taxable Person shall not be deregistered unless it has paid all Corporate Tax and Administrative Penalties due and filed all Tax Returns due under this Decree-Law, including its Tax Return for the Tax Period up to and including the date of cessation
Chartered Accountants top Audit Firm in Dubai UAE. Corporate Tax is to be withheld from State Sourced Income of UAE businesses in accordance with Article 45 of this Decree-Law.
The following income shall be subject to Withholding Tax at a tax rate of 0% (zero per cent) or any other rate:
a) The categories of State Sourced Income derived by a Non-Resident Person as prescribed in the decision issued by the Cabinet pursuant to this Article, insofar such income is not attributable to a Permanent Establishment of the Non-Resident Person in the State.
b) Any other income as specified in a decision issued by the Cabinet at the suggestion of the Minister. Federal Decree-Law No. 47 of 2022 – Unofficial translation 47
c) The Withholding Tax payable under Clause 1 of this Article shall be deducted from the gross amount of the payment and remitted to the Authority in the form and manner and within the timeline prescribed by the Authority.
the corporate tax law also requires any Taxable Person shall register for federal corporate tax in UAE with the Authority in the form and manner and within the timeline prescribed by the Authority and obtain a Tax Registration Number.
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UAE Corporate Tax is to be withheld from State Sourced Income of UAE businesses in accordance with Article 45 of this Decree-Law.
The following income shall be subject to Withholding Tax at a tax rate of 0% (zero per cent) or any other rate:
a) The categories of State Sourced Income derived by a Non-Resident Person as prescribed in the decision issued by the Cabinet pursuant to this Article, insofar such income is not attributable to a Permanent Establishment of the Non-Resident Person in the State.
b) Any other income as specified in a decision issued by the Cabinet at the suggestion of the Minister. Federal Decree-Law No. 47 of 2022 – Unofficial translation 47
c) The Withholding Tax payable under Clause 1 of this Article shall be deducted from the gross amount of the payment and remitted to the Authority in the form and manner and within the timeline prescribed by the Authority.
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