UAE has announced the introduction of a 9% corporate tax in the UAE on business profits with a threshold of AED 375,000. UAE's corporate tax rate will be one of the lowest in the world. Taxes are implied by the government on people, companies, goods, or services, by various names and types. Tax is a financial charge or a mandatory fee imposed by any government on an individual or an organization to collect revenue for public works and thus provide the best facilities and infrastructure.
It refers to a tax on the profits of a corporation. These taxes are paid on the company’s taxable income, which comprises Revenue minus the Cost of Goods sold (COGS), general and administrative (G&A) expenses, selling & marketing, Research & Development (R&D), depreciation, and other operating costs.
Tax and compliance requirements of most businesses in UAE are expected to completely change by adopting UAE Corporate tax. Corporate Tax is new to the UAE, and businesses require business consultancy services from a team of experts.
The Ministry of Finance had announced that it would introduce federal Corporate Tax on the net profits of the businesses.
Corporate tax in the UAE is brought into effect to:
- Strengthen its position as a leading global hub for business and investment
- Stimulate the development and transformation in achieving the strategic objectives
- Reinforce the commitment to meet international standards for transparency in tax and prevent malpractices.
When will the Corporate Tax in the UAE come into force?
As stated by the Ministry of Finance, Corporate Tax in UAE will be introduced by July 2023 or January 2024, based on the financial year followed by the business. The tax will affect all the emirates in the UAE.
Who will be affected by this tax?
Corporate tax will be applied on:
- Businesses and individuals involved in business activities under a commercial license in the UAE
- Free Zone businesses (Tax regime would honor the CT incentives currently being provided to the free zone businesses complying with the regulatory requirements, and not doing businesses in the mainland of the UAE)
- Foreign subjects and individuals, only if they conduct trade or business in the UAE, continuously or regularly
- Banking operations
- Real estate businesses, construction, development, agency & brokerage activities
Who/ what is NOT affected by CT (Corporate Tax)?
- Businesses involved in extracting natural resources, as they remain subject to Emirate-based corporate taxation
- Dividends and capital gains earned by UAE businesses from qualifying shareholdings
- Specific intra-group transactions and reorganizations, only if certain conditions are met
- Individual earnings; salary and similar employment income, either from the public or private sector
- Interest earned from bank deposits or saving schemes
- Income of a foreign investor from dividends, capital gains, interest, royalties, and other investment returns
Tax Compliance Services
We provide practical solutions to local and global organizations for all of their indirect tax and Economic Substance Regulations needs. To do this efficiently, we utilize our broad understanding of taxation practice, tax planning, and processes used globally, including in the UAE.
Our Tax Compliance Services
- Excise tax
- Assistance with return preparation and filing
- Obtaining tax clearance certificates
- Economic Substance Regulation
- Tax registrations, de-registrations, and modifications
- VAT (Value Added Tax) (VAT)
- Obtaining tax residency certificates in the UAE
Is your business ready for Corporate Tax in UAE 2023?
The tax and compliance requirements of most firms in the UAE are expected to completely change by adopting Corporate Tax in the UAE. At BMS Auditing, our expert team offers abundant support and answers all your questions related to Corporate Tax.
As UAE is new to Corporate Tax, businesses would require a great amount of assistance from a consultancy with a professional team. BMS Auditing is an FTA acclaimed tax agent with a team of over 50 expert staff members who have served more than 700 tax service clients in the UAE. Besides corporate tax services in UAE, we are offering the best audit services, accounting and bookkeeping services, VAT services and excise tax services.