The UAE has introduced Corporate Tax from Financial Year 2023, in the UAE Corporate Tax is a form of direct tax imposed on net income or business profit. The UAE introduced this tax with the aim of strengthening the country’s position as a leading global centre for business and investment, in addition to accelerating the country’s development and transformation to achieve its strategic goals and renewing its commitment to meeting international standards of transparency tax and prevent harmful tax practices.

Corporate tax will apply in the country for financial years starting on or after June 1, 2023, for example:

Businesses whose financial year begins on July 1, 2023 and ends on June 30, 2024, will be subject to corporate tax in the UAE from July 1, 2023 (which is the start of the first financial year starting on or after June 1, 2023)

Businesses that have a financial year (calendar) starting from January 1, 2023 and ending on December 31, 2023 will be subject to corporate tax in the country as of January 1, 2024 (which is the beginning of the first financial year starting on or after June 1, 2023).

Foreign entities and foreign individuals will be subject to corporate tax in the country only if they carry out a commercial activity or a continuous or regular business activity in the land of the United Arab Emirates.

Given below are the further details on the implication of the Corporate Tax- 

The rate of corporate tax-

• 0% for taxable income up to AED 375,000.
• 9% for taxable income over AED 375,000.

The entities that will be subject to corporate tax-

• All business and commercial activities within the United Arab Emirates.
• Income earned by an individual with a business license.
• Businesses established in free zones and which operate within the state.
• All banking operations (details will be provided later).
• Companies involved in real estate, construction, development, estate agencies, and brokerage activities.
 Entities that are exempt from corporate tax-
• The federal government, the governments of the Emirates, their departments, authorities, and other public institutions.
• Companies working in the field of extracting and exploiting the natural resources of the United Arab Emirates that are subject to taxes at the emirate level.
• Charitable societies and other public benefit institutions that are listed in the Cabinet Resolution.
• Public and private social insurance and pension funds.
• The individual’s salary or other income earned from the job.
• Investment in real estate by individuals in their personal capacity.
• Individuals’ income earned from the investment is taxable to the individual.
• The freelancer, unless his annual net income exceeds 375,000 dirhams.
• Interest and other types of income from bank deposits or savings programs that individuals earn for corporate tax.
• Eligible transactions between companies in the same tax group.

Businesses to register for Corporate Tax and the deadline for filing a tax return-

• A business must register for corporate tax (details will be provided later).
• It is mandatory to file a tax return for each financial period.
• The consequences of not complying with the corporate tax system-
• As with other taxes levied in the UAE, businesses will be subject to fines for non-compliance with the new corporate tax system.

Even with the introduction of the corporate law being pretty new to everyone, At AM Audit, we are knowledgeable in matters of audit, accounting and taxes and we will be glad to guide your business through the new era. 

The introduction and implementation of Corporate Tax in the UAE will be like treading unchartered waters and we understand the business’ need a comprehensive plan to navigate through these tough times. At The Law Reporters, we connect our readers with Law Firms and Tax Consultants who assist in providing a complete business plan which will prepare them for future uncertainties. 

For any enquiries or information, contact info@thelawreporters.com or call us on +971 52 644 3004