As per the Ministry of Finance, CT rates are: 0 percent for taxable income up to AED 375,000. 9 percent for taxable income above AED 375,000. This type of tax is known by several names such as corporation tax, income tax, or business profits tax. However, the official name is Corporate Tax (CT).
This tax does not replace other types of federal taxes, as the corporate tax in the UAE and other taxes applied by the state (VAT and Excise tax) are different types of taxes, and will be applied together in the country. The corporate tax in UAE entered into force starting from June 1, 2023. Therefore, if you own a company in UAE, your company is considered subject to registration for the tax without any exception, but you may be eligible not to pay any tax, and therefore we advise you to read this article. It’s a full guide with FAQs.
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UAE Implements and Raises 9% to 15% Corporate Tax for Large Multinationals Enterprises Starting from January 1, 2025.
All Businesses founded within the UAE, entities under state management, and those with a permanent presence in the UAE are categorized as entities subjected to corporate tax. Ownership by citizens of the country, citizens of the GCC countries, or residents does not alter this. Regarding individuals, they will be subjected to income tax solely if their aggregate income surpasses one million UAE dirhams in a calendar year. However, earnings derived from specific activities are exempt from this calculation, namely:
Starting from June 1, 2023, all companies in UAE must register for corporate tax, but not all companies must pay the tax at a rate of 9%.
The tax law stipulates the imposition of corporation tax with the following rates:
That means you will pay (9 percent) on income exceeding AED 375,000, if your business doesn’t exceed this amount, You won’t pay tax, but you still have to register for the tax and file your tax return by the end of every tax period.
As for free zone companies, they enjoy a preferential rate of (0%) upon meeting the qualifying income, while the rate is (9%) if their realized income is not qualifying income.
Qualifying income is income earned by businesses that meet the following conditions:
Yes, it is possible, given that the tax base for both taxes is different, and therefore companies registered for VAT purposes will have to pay both VAT and corporate tax separately.
Fee obligations to the federal and local governments remain outstanding and payable, bearing in mind that fees and other expenses incurred exclusively for business purposes will be deductible expenses when calculating taxable income.
Deductible expenses are legitimate expenses that businesses incur to generate taxable income.
Yes, these expenses include bribes, administrative fines, financial penalties, expenses incurred to generate exempt income, and losses not resulting from the actions of the taxable person.
It will be subject to corporate tax on its income generated from inside and outside the country.
Companies that are not registered in the country will be subject to corporate tax only on their income generated in the country from their permanent establishments or income arising in the country.
Taxable income is the net accounting profit or loss for a given tax period after adjustments for certain items specified in the Corporation Tax Act.
The tax period is the calendar year, meaning it begins on January 1 and ends on December 31, and companies can prepare their financial statements during a different (12) month period.
The Corporate Tax Law stipulates that some entities are exempted from corporate tax in the Emirates, either automatically or by submitting a request to do so:
Yes, there are types of income that are exempt from tax. Below is a list of that:
You must submit one tax return for each tax period, and the law sets a deadline of nine months from the end of the relevant tax period for taxable persons to submit their tax returns. This is not related to achieving a specific income, as the return is submitted regardless of the level of income achieved or the status of the company.
You must pay the corporation tax payable before the end of nine months from the end date of the relevant tax period.
A tax loss arises for the purposes of the UAE corporate tax law when the total deductions claimed by the business are greater than the total taxable income during the relevant tax period, giving rise to negative income for the taxable person.
Yes, this is according to certain conditions, as tax losses can be deducted from taxable income during subsequent periods at a rate of up to (75%) of taxable income for each of those subsequent periods, and the unused surplus of tax losses can be carried forward and used for the purposes of reducing Income subject to tax in subsequent periods and indefinitely.
Yes, as any of the group companies’ resident in the country can use those losses to deduct the taxable income of another company in the group, as long as there is joint ownership of 75% or more.
The transfer of tax losses does not apply to companies that are exempt from tax or benefit from the corporate tax system in the free zone at a rate of (0%).
Withholding tax at source is a form of corporate tax in the UAE that is collected at source from the payer on behalf of the recipient of the income. This type of tax is usually applied in relation to international payments related to dividends, shares, interest, royalties and other types of income.
This tax is applied at a rate of (0%) on specific types of income arising in the country paid to non-residents, and as long as the rate applied to it is (0%), there will be no obligations related to paying the due tax, registering for the tax, or submitting business tax returns. Resident in the country or foreigners who receive income generated in the country.
Yes, this is possible provided that the value of the foreign tax credit does not exceed the value of the corporate tax payable on the income in question. It must be noted here that it is not possible to carry over any surplus from the foreign tax credit to any of the previous or subsequent tax periods alike.
Only resident companies can form a tax group provided that the parent company residing in the country owns, directly or indirectly, at least 95% of the capital and voting rights of each of the companies composing the tax group.
No, except if the foreign entity is managed and controlled within the country and is considered a resident entity in the country for corporate tax purposes.
The tax group is treated as a single taxable person, with the parent company being responsible for managing the tax aspect of the group, performing the tax payable and submitting tax returns on behalf of the group.
The parent company and each subsidiary company shall be jointly and severally responsible for the group’s tax obligations, and joint and several liability may be limited to one or more member companies of the group, provided that the Federal Tax Authority approves this.
To seamlessly meet corporate tax requirements and ensure compliance, Taxable Persons are advised to seek the expert services of top Tax Consultants in UAE. Thus, contact us today and we shall be glad to assist you.