Corporate Tax has arrived in the UAE, affecting all businesses except mining industries and natural resource extraction, which will remain subject to Emirate level corporate taxation. This new tax will also apply to foreign entities and individuals conducting trade or businesses in the UAE region on an ongoing or regular basis.
All categories of profits and net income sources reported in financial statements and annual audits prepared in line with global accounting standards will be subject to the UAE Corporate Tax equally. For taxable income up to Dh375,000, small businesses and startups will receive a 0% tax rate, while a 9% corporate tax rate will be applied for taxable income exceeding Dh375,000.
The objective of introducing Dubai Corporate Tax is to maintain the UAE’s position as a global leading hub for business and investments while adopting international standards for tax transparency to prevent tax malpractices. Additionally, it aims to accelerate the UAE’s development and transformation to achieve its global strategic objectives.
The UAE Corporate Tax is a milestone in terms of diversification and has received media attention as it is the lowest in the GCC. It also comes with a set of perks and benefits, including tax credits and incentives.
There are over 35 Free Trade Zones (FTZs) in the UAE that offer tax holidays or a 0% corporate and personal income tax rate for companies and individuals alike. Some FTZs even offer exemptions from customs duties and VAT for the movement/supply of goods, provided they meet certain criteria. However, laws and regulations granting these tax holidays and exemptions vary across FTZs, so each FTZ must be considered individually for its perks and benefits.
Corporate tax will only apply to the adjusted accounting net profit of the business in question. Foreign investors who do not carry out businesses in the UAE are not subject to corporate tax. Free zone businesses meeting all necessary requirements can continue to benefit from corporate tax incentives. Extraction of natural resources will still be subject to Emirate level corporate taxation.
No withholding taxes will be applied to capital gains and dividends received by a UAE business from qualified shareholdings. Corporate tax will not apply to qualified intragroup transactions and restructuring. Foreign tax will be allowed to be credited against the UAE corporate tax payable. Generous loss transfer utilization rules will be accessible to businesses. Charities and public benefit organizations listed in a cabinet decision, including public and regulated private social security and retirement pension funds, are exempted.
In conclusion, all businesses must use their financial accounting period as their (annual) tax period, and financial statements must be prepared using accounting standards and protocols acceptable in the UAE. If a business does not have a financial accounting period, the default tax period will be considered as the Gregorian calendar year.
How to Get Started with Corporate Tax in Dubai
Corporate tax is applicable to all companies operating in Dubai, but the current corporate tax rate is zero percent. Despite the zero-tax rate, companies may still be required to submit financial statements and file tax returns. Non-compliance with corporate tax laws can result in penalties, fines, and legal action. To ensure compliance, companies should register for taxes, submit financial statements, and file tax returns on time. It is also advisable to seek the services of a qualified corporate tax consultant in Dubai.
