Corporate Tax in UAE from 1st June ’23 – Top 7 Questions Answered
1. What is corporate tax in UAE?
Corporate tax is a form of direct tax levied on the net income or profit of corporations and other business entities. It is also commonly known as ‘Corporate Income Tax’ or Business Profits Tax.’
In simple words, it is a tax levied on the net profit made by the businesses. It requires companies to pay a certain percentage of profit as tax.
2. Who should pay corporate tax in the UAE?
All the businesses whose taxable profit (net) is more than 375,000 AED fall under the purview of corporate tax and are required to pay a certain percentage of net profit as corporate tax.
3. What is the rate of corporate tax in the UAE?
The corporate tax rate is at 9% of the net profit made by the businesses. In order extent support to small businesses and start-ups, the corporate tax rate will be ‘0’ % if the net profit is up to 3,75,000 AED.
4. What is the date of implementing the federal corporate tax in UAE?
The date of implementing the corporate tax is effective from the financial year starting on or after 1st June, 2023.
5. When will the corporate tax law be released by the authorities?
The authorities already released the corporate tax law on 9th December 2020. The UAE corporate tax is made available through a ‘Federal Decree-Law no. 47 of 2022 on their official website. To download the UAE corporate tax law, you can visit the Ministry of Finance website.
6. What are the businesses or incomes that are outside the scope of corporate tax?
Given the profit threshold of 3,75,000 AED, all businesses that exceed the threshold have to pay the corporate tax. However, certain types of business or income are exempt from corporate tax. Below is the list of companies or income exempt from corporate tax:
Individuals will not be subject to corporate tax. As a result, any income from employment, real estate, investments in shares, and other personal income unrelated to a trade or business in the UAE will be exempt from corporate tax
Not applicable to foreign investors who do not carry on business in UAE
Corporate tax incentives are currently being offered to free zone businesses that comply with all regulatory requirements will continue.
Capital gains and dividends received by UAE businesses from its qualifying shareholdings are exempt from corporate tax
Not applicable on qualifying intragroup transactions and restructurings.
7. How is corporate tax in UAE calculated?
Corporate tax in UAE is calculated at 9% of the net profit shown in the company’s financial statements. The 9 % corporate tax will be levied only if the taxable net profit exceeds 375,000 AED. In other words, the net profit up to 3,75,000 AED is taxed at 0%.
For example, If the net profit is 4,75,000 AED, the corporate tax will be 9,000 AED (4,75,000-3,75,000 X 9/100)
