Corporate Tax , Who should register for it in UAE 2023-2024
Corporate Tax in uae
FTA registers certain persons for Corporate Tax to allow them to obtain a Corporate Tax registration Number and fulfill their obligations
The Corporate Tax due under this Decree-Law is settled in the following order:
- First, by using the Taxable Person’s available Withholding Tax Credit.
- the Taxable Person’s available Foreign Tax Credit.
- To the extent forms of relief as specified in a decision issued by the Cabinet at the suggestion of the Minister.
What is Corporate Tax?
From June 1, 2023, a new corporate tax came into effect in the United Arab Emirates, affecting almost all business persons in the country. The Emirates are gradually moving away from a tax-free environment and are striving to maintain tax transparency in business, comply with international financial standards, and combat illegal activities and tax evasion. This is important as the country positions itself as a global financial and trading center and is actively implementing advanced tax and accounting practices. In 2024, the UAE achieved significant results in this regard, leading to its removal from the FATF “gray” list. This indicates a positive trend, suggesting that authorities will likely continue to develop and enhance their tax system.
All legal and natural persons conducting business in the UAE are required to register for corporate tax purposes with the tax authority, obtain a taxpayer registration number, and annually file a tax return. This must be done in 2024. Failure to register on time will result in a penalty of 10,000 dirhams.
Corporate tax in the UAE is one of the lowest in the world, at 9%. There are also opportunities to reduce it to 0% under certain conditions. The Ministry of Finance has published a list of 352 questions covering the entire spectrum of topics related to the new tax regime. In this article, we will highlight the most relevant questions.
Key aspects of UAE Federal Corporate Tax
Corporate tax is applied to taxable income, which is net profit or loss adjusted for certain items as defined by the corporate tax law in UAE.
The UAE corporate tax law is federal and therefore applies in all Emirates.
The standard corporate tax rate is 9%. However, special conditions apply to companies in free zones, as well as to small businesses and individuals.
Taxable persons for the corporate tax purposes can be juridical and natural persons.
The tax period is the calendar year according to the Gregorian calendar (from January 1 to December 31), unless a different period is applied for financial reporting purposes.
Who is subject to the corporate tax in the UAE?
- Juridical persons (in mainland and free zones)
- Natural persons conducting business activities under a license
- Foreign persons with a permanent establishment in the UAE receiving income from the UAE sources
Corporate tax rates in the UAE
Mainland companies:
- Taxable profit up to 375,000 dirhams is taxed at a rate of 0%.
- Taxable profit exceeding 375,000 dirhams is taxed at a rate of 9%.
Free zone companies:
- For companies earning income from qualifying activities (Qualifying Free Zone Person), a corporate tax rate of 0% applies.
To qualify for the zero rate, the following criteria for QFZP must be met:
- the company’s activities must be among the government-defined qualifying activities; companies must operate within the free zone territory.
- Own a sufficient amount of assets; have an adequate number of qualified employees; demonstrate a sufficient level of operating expenses.
- Profit derived from other sources is taxed at the standard corporate tax rate of 9%.
Who is exempt from corporate tax?
The new tax rules do not apply to certain categories of persons:
- Federal governments and the governments of the Emirates, their agencies, authorities, and other government entities; State-owned enterprises.
- Companies engaged in the exploration of natural resources in the UAE
- Public benefit organizations.
- Investment funds.
- Government and private pension funds and social security funds.
Which incomes are not subject to corporate tax?
- Individual salary
- Investment income and income from deposits
- Real estate income
- Rental income
- Dividend income
- Inheritance
- Capital gains
AHG is the 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.