Corporate Tax in UAE-Impact Study
Impact Study Of Corporate Tax In UAE
The Ministry of Finance announced the introduction of federal corporate tax services in Dubai on 31 January 2022 and a new decree regarding the implementation of Corporate Tax on 09 December 2022. The corporate tax in UAE will be applied on business profits effective on or after 1 June 2023. The new CIT will make its impact on the various business entities in UAE.
The UAE corporate tax regime has been made to incorporate best practices globally and minimize the compliance burden on businesses. It is the lowest tax rate among the GCC countries, and more details about the corporate tax are yet to be released. The corporate tax in UAE has been designed according to international accounting standards. The tax will be applied to the profits of commercial or business enterprises and it emphasizes the importance of auditing the financial statement on time from now on. The extraction of natural resources will continue to be subjected to emirate-level corporate taxation. It is the only business activity that has an exception from the UAE corporate tax. Entities operating in the Free zone have some exemptions subject to fulfilment of certain conditions.
Applicable Rates Of Corporate Tax In UAE
- UAE companies and other juridical persons that are incorporated or effectively managed and controlled in the UAE
- Natural persons who conduct a Business or Business Activity in the UAE as specified in a Cabinet Decision to be issued in due course
- Non-resident juridical persons that have a Permanent Establishment in the UAE
- Individuals are not subject to corporate tax in UAE. Personal income is exempted from corporate tax
- Corporate tax in UAE does not apply to foreign investors who do not conduct business activities in UAE
- Free zone businesses that comply with the regulatory requirements will continue to enjoy corporate tax in UAE incentives
- Capital gains and dividend income received by UAE companies from their qualifying shareholdings
- Profits from qualifying intragroup transactions and restructurings
Corporate Tax In UAE Rates
Corporate Tax In UAE On Free Zone Businesses
Free Zone Persons are subject to a 0% CT rate on their qualifying income. To be considered as a Qualifying Free Zone Person, the Free Zone Person must meet certain requirements. Free zone businesses can also derive a 0% corporate tax rate on income earned from certain regulated financial services directed at foreign markets.
If a Qualifying Free Zone Person fails to meet any such conditions or makes an election to be subject to the regular Corporate Tax regime, they are required to pay the standard rates of Corporate Tax from the beginning of the Tax Period where they failed to meet the specific requirements.
- CT Rate For A Free Zone Person With A Mainland Branch
- CT Rate For Free Zone Persons Trading With The Mainland Without A Branch
- Transactions With Group Companies
