The Finance Ministry in the UAE announced the introduction of Corporate Income tax on 31 January 2022.
The UAE is a member of the OECD Inclusive Framework on Base Erosion and Profit Shifting (“BEPS”) and is hence committed to meeting the International Standards for tax transparency and preventing harmful tax practices.
When Corporate Tax Applicability becomes Effective?
- The UAE Corporate Tax regime will become effective for financial years starting on or
after 1 June 2023. - If a business has a calendar as their financial year, then the Corporate tax shall be effective
from 1 January 2024, which is clear. - Moreover, as Corporate Income Tax is a Federal Tax, it is implemented across Emirates
uniformly.
- The UAE Corporate Tax regime will become effective for financial years starting on or
Corporate Tax Applicability is done to whom?
- The UAE Corporate Tax regime will apply to all UAE businesses/Commercial activities
except for the extraction of natural resources. - If the individuals have ongoing and regular business in UAE, they would be subject to
Corporate Tax. - Individuals having income from salary/employment income shall not be subject to
Corporate Tax. Also, dividends, capital gains, and other income from owning shares/
securities earned by individuals in their capacity would not be subject to Corporate Tax. - Passive income of foreign investors, i.e., dividends, capital gains, interest, royalties, and
other investment returns, may not come under the purview of Corporate Tax.
- The UAE Corporate Tax regime will apply to all UAE businesses/Commercial activities
Corporate Tax Rate in UAE
| Taxable Income | Rate of Tax |
| Taxable income up to AED 375,000 | 0% |
| Taxable income above AED 375,000 | 9% (on portion of taxable income exceeding AED 375,000 |
| For large Multination’s (having consolidated business revenues in excess of EUR 750 Million / AED 3.1 Billion) | A different Tax Rate. (As per the Guideline from OECD- Pillar 2 it will be minimum 15%) |
Taxable Income as per Corporate Tax
- The taxable income = Net profit/income of a business prepared following internationally
accepted accounting standards, subject to certain adjustments as provided by Regulation. - The specific exemption would be for Dividends and capital gains earned by a UAE business
from its ownership interest subject to specified conditions. - Carry forward of losses shall be permitted subject to fulfillment of certain conditions.
- Credit for the taxes paid in a foreign jurisdiction on UAE taxable income shall be allowed.
- The taxable income = Net profit/income of a business prepared following internationally
Tax Group
- Group of Companies can elect to form a tax group and be treated as a single taxable
person, subject to fulfillment of certain conditions. - Intragroup transactions and reorganizations would not be subject to Corporate Tax in
UAE, provided necessary conditions are met.
- Group of Companies can elect to form a tax group and be treated as a single taxable
Free Zones and Corporate tax applicability
Free Zone entities would be subject to Corporate Tax. However, Corporate Tax incentives shall be provided to honor the commitment, and such entities will have to fulfill compliance (registration and filing of Return) obligations.
Transfer Pricing – Related Party Transaction
UAE businesses will need to comply with transfer pricing rules and documentation requirements set concerning the OECD Transfer Pricing Guidelines to enable Calculations of Corporate Tax as per the Regulation.
Corporate Tax – Compliance
| Registration | Required |
| Filing of Return of Income | Annually |
| Advance Tax Calculations | Payment – Not Applicable |
| Method of Filing | Electronic |
Corporate Tax – Withholding Tax
At present, withholding tax will not be applicable on domestic and cross-border payments of any nature