UAE Corporate Tax

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INTRODUCTION TO CORPORATE TAX

Corporate tax (CT) is a form of direct tax levied on the net income or profit of corporations and other entities from their business. Corporate Tax is sometimes also referred to as “Corporate Income Tax (CIT)” or “Business Profits Tax” in other jurisdictions. The UAE Ministry of Finance (MoF) has made the breakthrough announcement that a new federal corporate tax (CT) system will be implemented in the UAE, effective financial years commencing on or after 1 June 2023. The UAE has introduced the lowest corporate income tax rate within the GCC region at a standard rate of 9%.

THE GOALS OF THE NEW CORPORATE TAX IN UAE

  • Establishing the UAE as a world-class investment and business destination.
  • Keeping taxes transparent and avoiding unfavorable tax consequences.
  • Achieving the UAE’s strategic goals by accelerating its development and transformation.
  • Encouraging Accountability and achieving enforcing best tax practices.

SCOPE OF CORPORATE TAX IN UAE

Corporate Tax will apply to:

  • Businesses and individuals conducting business activities under a commercial licence in the UAE.
  • Free zone businesses (Freezone companies shall receive the benefit of the CT incentives if they comply with all regulatory requirements and are not conducting business in the UAE’s mainland).
  • Foreign companies and individuals only if their business is effectively managed and controlled in the UAE.
  • Banking operations.
  • Businesses that encompass construction, development, real estate management, agency, and brokerage activities.

EXEMPTED INCOME UNDER CT LAW IN UAE

The following income shall be in general exempt from income Tax:

  • Dividend income earned by UAE company from its qualifying shareholdings (to be defined in the law)
  • Capital gains
  • Profits from group reorganization
  • Profits from Intra-group transactions

CORPORATE TAX ON UAE FREE ZONES

According to the rules of each Free Zone, the UAE intends to uphold its commitment to businesses registered in Free Zones that do not conduct business with the mainland and that will benefit from corporate tax benefits. All free zones are obliged to submit an annual CIT return.

The following requirements must be met by a free zone person in order to qualify as one:

  • Keep the UAE’s substance up to par
  • Derive ‘Qualifying Income’
  • Not chosen to be liable to Corporate Tax at the Standard Rates; and
  • Follow the Corporation Tax Law’s transfer pricing obligations.

A Qualified Free Zone Person may be required to comply with extra requirements set forth by the Minister. The usual rates of corporate tax will apply starting with the start of the Tax Period in which the Qualified Free Zone Person fails to satisfy any of the qualifications or elects to be subject to the regular corporate tax regime.

CORPORATE TAX IMPACT ASSESSMENT

  • Tax compliance: Evaluating the company’s compliance with the tax laws and regulations in the UAE,including the submission of tax returns and payment of taxes owed.
  • Tax planning: Identifying opportunities to minimize tax liabilities and optimize tax benefits, such as claiming tax credits and deductions.
  • Transfer pricing: Evaluating the transfer pricing policies of the company to ensure compliance with tax laws and regulations, including the transfer of goods, services, and intellectual property between related entities.All companies have to comply with the Transfer Pricing rules and documentation requirements. These transfer pricing rules will now become mandatory and may also be applicable to domestic transactions.
  • Losses: Accumulated taxable losses shall be allowed to offset future taxable profits. 
  • Tax Grouping:Tax grouping and group relief provisions are allowed. UAE Groups should be able to file consolidated tax returns. Offsetting tax losses among groups might be allowed. 
  • Foreign Tax Credits: Taxable entities will be allowed to take as a credit against its annual tax liability the foreign corporate tax paid on UAE taxable income.

REGISTERING, FILING AND PAYING CORPORATE TAX

All Taxable Persons (including Free Zone Persons) and those exempt persons who are required to register for corporate tax must register for Corporate Tax and obtain a Corporate Tax Registration Number.
During each Tax Period, Taxable Persons are expected to submit a Corporate Tax return within nine months after the conclusion of the applicable period. The same deadline would apply for the payment of any Corporate Tax due in respect of the Tax Period for which a return is filed.

CORPORATE TAX CONSULTING BY QUANTUM AUDITING

 

QUANTUM AUDITING provides the following services related to Corporate Tax:

  • Corporate Tax Registration
  • Impact Analysis
  • Implementation Plan and Assistance
  • Post Implementation Assistance and Monitoring
  • Corporate Tax Filing
  • Corporate Tax Refund
  • Corporate Tax De-registration

Quantum Auditing has been providing professional auditing services in Dubai, UAE since 2011. Ranked as one of the best audit firms in Dubai, UAE, we are geared up to help you with a smooth transition quickly and efficiently to make your business UAE Corporate Tax Compliant.

Tax Experts at Quantum Auditing possess strong expertise and help the companies to ensure tax compliance. We have successfully assisted companies in complying with Value Added Tax (VAT) and Excise Tax and our impeccable track record will come in handy for businesses to meet the requirements related to corporate tax in the UAE.

For further assistance, please contact us at: info@quantumauditing.com