Recently, the UAE Corporate Tax statute was officially issued through the Federal Decree Law No. 47 of 2022 on the net revenue of both businesses and corporations. This serves to confirm that registered entities that meet the Corporate Tax’s threshold will be compelled to render corporate tax commencing from the first fiscal year, (June 1^st 2023).

The Scope of the Latest UAE Corporate Tax Law

For financial years effective from 1^st of June 2023, the corporate tax legislation serves as the legal foundation for the adoption and operation of a Federal Corporate Taxation in the UAE. The UAE's pledges for enacting a fixed percentage tax for multinational corporations, promoting tax transparency, and eliminating harmful tax practices are reflected in the recent Corporate Tax Statute as part of the country's cooperation with the OECD Guidelines on Reference Erosion and Profit Shifting. Upon the corporate tax’s exemptions, natural resource’s extraction operations are not subject to corporate tax in the UAE, they still fall under the cognizance of the emirate tax level. Moreover, organizations including government institutions, pension funds, investment funds, and public benefit organizations are exempted. Further, free zone firms are deemed to have 0% Corporation Tax rate on relevant revenue.

Who Is Subject to the UAE Corporate Tax?

Taxable persons are compelled to pay a corporate tax return on any taxable income received during a tax period in the UAE. The corporate tax will be levied once a year, the taxable persons ought to determine burden of proof through self-assessment. The revenue (i.e., net profit or loss at tax) of the taxable person as reported in their financial accounts serves as the basis for computing taxable income. To establish respective earnings for the applicable tax period, the taxable entity will next need to make a few modifications.

Corporate Tax Rate for Resident Taxable Persons

On the part of the Taxable Income, 0% (Zero Percent) (i.e., 375,000)

⮚A corporate tax rate of 9% (nine percent) on taxable income exceeding AED 375,000 will be levied.

⮚0% of the income that does not meet the threshold.

A Qualifying Free Zone Person has the option to elect to be liable for tax. Qualifying Free Zone Persons are eligible for a preferential corporate tax of 0% on their "Qualifying Income" only.

What is the Corporate Tax for Free Zones?

A Free zone entity must maintain sufficient residence in the UAE, derive "Qualifying Income," not have helped make a poll to be subject to Taxable Years only at standard rates, and adhere to the international accounting requirements set established by the Commercial Tax Law in order to be regarded.

With the Remaining Tax Rate (Source Tax Deducted)

A 0% withholding tax could be set to a form of income received by non-residents from the UAE. Transactions between UAE residents are exempt from withholding tax.

Choose Top Corporate Tax Advisory Services in the UAE

The issuance of the recent corporate tax in the UAE remains a new phenomenon to a number of corporations, thus the complete framework and enforceability might still be ambiguous. Hence, it is imperative for registered corporations to outsource trusted tax services. So, get in touch with expert corporate tax advisors today and avail pertinent assistance.