Corporate Tax - What is it?

The United Arab Emirates is one of the most attractive countries in the world for doing business. This is due not only to its high level of economic development and favorable investment climate, but also to its loyal tax policy.

Amidst the instability of the global economy, the UAE government decided to introduce a corporate tax to increase its budget revenues and reduce its dependence on the oil and gas sector. Its rate of 9% is relatively low compared to the tax rates of other countries. As a result, the Emirates has been and continues to be one of the leading countries where thousands of entrepreneurs prefer to operate.

Corporate Tax: Key Provisions

From the beginning of June 2023, the national government introduced the federal corporate income tax. It is a tax on the net profit (income) from business activities.

All entities subject to the tax must be registered as taxpayers and submit tax returns within the established deadlines. Liability is provided for non-compliance with the rules of tax legislation.

The following are not subject to corporate income tax

How to start a business in Dubai Free Economic Zone?

Before you start your business in Dubai Free Zone, you need to go through the following steps:

1. First, decide on the nature of your core business and its legal form of organization, if you have not already done so.
2. Choose a sound and unique name for your company that meets the requirements of the Dubai Department of Economic Development. Then submit it for verification and reservation.
3. Rent an office space in the free zone according to the requirements.
4. Collect the required package of documents, business plan and other approval documents. Submit all documents to the relevant authority.
5. Obtain a UAE Business License.
6. Obtain a UAE Resident Visa.
7. Open a bank account with a local bank.
8. Obtain visas for foreign employees, if required.

Who should pay corporate income tax in the Emirates?

With the recent tax innovations that have come into effect, the following categories of persons are subject to taxation

• Companies (legal entities) registered in the country and generating profits;
• Individuals engaged in business activities;
• Freezone companies (tax exemptions are maintained if they do not conduct their business outside the Freezone);
• Foreign legal entities with a permanent establishment in the Emirates.

All of the above categories of persons (doing business on the mainland) are subject to corporate tax at the following rates:

1. Companies earning less than AED 375 thousand per year are taxed at 0%. This is to allow small businesses and start-ups to grow efficiently.
2. Companies earning more than this amount are taxed at 9%.
3. No tax is levied on qualifying income in the UAE Emirates.
4. Large multinational companies are taxed at a different rate.

Thus, corporate tax in the UAE is paid by most companies registered in the country and making profits. However, the government of the Emirates provides a number of benefits and tax exemptions for certain categories of individuals, which helps to maintain the country's high level of attractiveness for business and investors.

What are the penalties for non-compliance with UAE tax laws?

There are penalties for incorrectly filing tax returns, with fines increasing as time goes on. The Emirates Federal Tax Authority is responsible for the accuracy, timing and collection of taxes.

Key Aspects of UAE Tax Law

Where to start with filing a corporate income tax return?

1. First, you should register as a taxpayer in the UAE.
2. Then you need to determine if you are subject to corporate income tax.
3. If you are, you will need to file an electronic return based on your accounting records.

If you have any problems with tax registration or need assistance in developing a tax strategy, it may be helpful to seek professional advice.

Contacts

United Arab Emirates, Dubai, Barsha Heights, I-Rise Tower, 29th Floor, Office 5