Under the corporate tax law in UAE, businesses with annual taxable profits that fall under AED 375,000 shall be subject to a 0% rate from June 1, 2023. All annual taxable profits above AED 375,000 shall be subject to a 9% rate. The UAE Corporate Tax Law provides the legislative basis for the implementation of a Federal Corporate Tax Law in the UAE and is effective after 1 June 2023. The federal decree law holds information related to criteria, tax rates, and other details necessary to know before implementing corporate tax into your business. Here, we mentioned some clear views of what corporate tax law is all about.
As we know, Corporate Tax is a direct tax levied on the net income or the profit earned in the businesses. The UAE implemented this tax to strengthen the current position of the country, as the leading global hub for business and investment.
According to the UAE's Corporate Tax Law, taxable profits over Dh375,000 are subject to a standard rate of 9%. To help small firms and start-ups, profits up to and including that amount will be taxed at 0%. Corporate Tax also facilitates the overall development and transformation to acquire the strategic goals and revamps the commitment to attaining international standards of clarity tax and preventing malicious practices.
When Will Corporate Tax Be Effective?
As per the corporate tax law in the UAE, Corporate Tax would be implemented in the country for financial years after June 2023, i.e, 6 months. For instance,
- Businesses with financial year falling between 1st July 2023 and 30 June 30, 2024, would be affected by corporate tax from July 2023
- Businesses whose financial year falls between January 1, 2023, and December 31, 2023, would be affected by corporate tax with effect from January 1, 2024 (being the first financial year starting after June 2023
What is UAE Corporate Tax Law about?
The federal decree law released by the FTA in December covers various aspects of corporate tax rates for Businesses, Freezone Persons, Taxable persons, and other regulations. It also covered topics such as the imposition of Corporate tax, Corporate Tax exemptions, Deductions, etc.
The Corporate Tax law is divided into 20 chapters which consist of several articles related to CT. Here is the Table of content for the Federal Decree Law.
- General Provisions
- Imposition of CT and CT Rates
- Exempt Persons and Businesses
- Taxable Person and Corporate Tax Base
- Free Zone Person
- Calculating Taxable Income
- Exempt Income
- Corporate Tax Reliefs
- Deductions and Expenditure
- Transactions with Related Parties and Connected Persons
- Tax Loss Provisions
- Tax group Provisions and Formation
- Calculation of Corporate Tax Payable
- Payment and Refund of Corporate Tax
- Anti Abuse Rules
- Corporate Tax Registration and Deregistration
- Tax Returns and Clarifications
- Violations and Penalties
- Transitional rules
- Closing Provisions
Here are some overviews from the Federal Decree Law; Follow BMS Auditing to keep updated about the depth of UAE Corporate Tax Law.
You can download the UAE Corporate Tax law released by the FTA by clicking the link below
What Is The Standard Rate of Corporate Tax?
- 0%: for income up to AED 375,000
- 9% for income above AED 375,000
are the CT rates that are finalized by the FTA according to the federal decree law.
How to calculate Corporate Tax If The Revenue Exceeds AED 400,000?
Since the income up to AED 375,000 is 0%- NIL
Income exceeding AED 375,000 (400,000-375,000=AED 25000) at 9%= AED 2,250
Hence, the Corporate Tax for the financial year is 0+2,250= AED 2,250
Will Free Zones Be Affected By Corporate Tax?
Corporate Tax will affect the businesses in the free zones of the UAE. However, the free zone businesses adhering to the regulatory requirements and not conducting business in the Mainland UAE would enjoy the corporate tax benefits. Free Zones are required to register themselves and file corporate returns.
Corporate Tax for Foreign Individuals & Entities
The corporate tax law impacts those foreign individuals who regularly conduct business in the UAE. A foreign investor who derives income from dividends, capital gains, interest, royalties, and other investment returns would not be affected by Corporate Tax in the UAE.
How Can BMS Help You With Corporate Tax Services?
BMS provides incomparable Corporate Tax Services in UAE to ensure complete compliance with updated CT law regulations. We are the leading financial consultants who provide you with quality services related to corporate tax and assist you in complying with tax regulations.
Reach out to BMS 24 x 7 for any queries or assistance!