Office 938, Business Tower, Burjuman, Dubai, UAE
Tax Consultancy / VAT Consultancy /

Corporate Tax in UAE

On 8th October 2021, the United Arab Emirates (“UAE”) (amongst 137 countries) agreed to implement the OECD’s Two-Pillar approach to reform its International Tax Framework and to implement a minimum Corporate Tax in UAE rate starting in 2023. Following this development, the UAE Ministry of Finance announced on January 31, 2022, that a Federal Corporate Tax regime would be implemented on business profits beginning on or after June 1, 2023. 

The net income or profit of corporations and other businesses is subject to corporate tax in the United Arab Emirates. Future licensees conducting business in the UAE will have to determine how the restrictions will affect them and adopt the necessary compliance measures. The UAE Tax Authorities have already declared that failure to comply will result in severe penalties.

UAE

Corporate Tax

Below are the corporate tax rate applicable

  • Tax rate @ 0% for Taxable income up to AED 375,000
  • Tax rate @ 9% Taxable income over and above AED 375,000
  • Different tax rate for Large multinationals (having consolidated global revenue exceeding EURO 750 million – equivalent to AED 3.15 billion) that meet specific criteria set with reference to “Pillar Two” of the OECD Base Erosion and Profit Shifting Project

Foreign entities and foreign individuals will be subject to Corporate Tax only if they conduct a trade or business in the UAE in an ongoing or regular manner.

Additionally, a foreign investor’s income from dividends, capital gains, interest, royalties, and other investment returns will often not be subject to Corporate Tax in UAE. The OECD Transfer Pricing Guidelines, specifically the Master File and Local File, will now form the basis for transfer pricing regulations and documentation requirements. To support their pricing strategies for inter-company creation and liquidation, groupings of businesses will need to do benchmarking searches as part of the documentation process. 

We are awaiting more information/clarifications on possible exemptions for eligible intra-group transactions and other compliance standards that might be implemented. Businesses operating in free zones, including financial free zones, must pay corporate tax in UAE. It has been made clear that, notwithstanding this, the corporate tax regime would continue to honor the corporate tax incentives now provided to free zone enterprises that abide by all legal requirements and don’t operate in the mainland UAE. Corporate Tax Return and Accounting & Bookkeeping services must be registered and filed by businesses that are founded in a free zone.

our team of experts can help you in assessing the challenges and opportunities that the introduction of a Corporate Tax will bring in the following manners.

  • Impact assessment of Corporate Tax on business and applicability thereto
  • Analysis of the impact of Corporate Tax on Free Zone (including Financial Free Zone) entities
  • Advice on whether any exemption can be availed
  • Advice on Group Corporate Tax and how to minimize potential risks
  • Advice on potential Corporate Tax risk areas and challenges faced by taxpayers
  • Assist in restructuring the business/operational model from the Corporate Tax perspective
  • Advice on availing Foreign Tax Credit paid by taxpayers in other countries
  • Advice on withholding tax.
  • Assist in registration for Corporate Tax in UAE before the relevant authorities
  • Computation of taxable income and corresponding Corporate Tax in UAE.
  • Preparation and Vat return filing.
  • Preparing the written submissions to be furnished before tax authorities
  • Assisting in filing the response against the notices received from tax authorities
  • Filing of written appeal against the adverse tax adjustments made or penalty imposed by the tax authorities
  • Representing the taxpayers before tax authorities and arguing on behalf of taxpayers.

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