Company Formation in UAE

Corporate Tax Services in UAE



Corporate Tax (CT)​ in UAE

Corporate Tax is a form of direct tax levied on the net income or profit of corporations and other businesses. The UAE CORPORATE TAX is a Federal tax and will therefore apply across all Emirates.

UAE CORPORATE TAX will apply to all UAE businesses and commercial activities alike, except for the extraction of natural resources, which will remain subject to Emirate level corporate taxation.

An individual having (or being required to obtain) a business license or permit to carry out the relevant commercial, industrial and/or professional activity in the UAE will be within the scope of UAE.

Period

The UAE CORPORATE TAX regime will become effective for financial years starting on or after 1 June 2023

Examples:

  • A business that has a financial year starting on 1 July 2023 and ending on 30 June 2024 will become subject to UAE CORPORATE TAX from 1 July 2023 (which is the beginning of the first financial year that starts on or after 1 June 2023)

  • A business that has a (calendar year) financial year starting on 1 January 2023 and ending on 31 December 2023 will become subject to UAE CORPORATE TAX from 1 January 2024 (which is the beginning of the first financial year that starts on or after 1 June 2023)


    • Corporate Tax Rate


    The CORPORATE TAX rates are:

  • 0% for taxable income up to AED 375,000;

  • 9% for taxable income above AED 375,000; and

  • A different tax rate for large multinationals that meet specific criteria set with reference to 'Pillar Two' of the OECD Base Erosion and Profit Shifting project

    • The CORPORATE TAX liability will be calculated as follows:

  • Taxable income of AED 0 - AED 375,000 at 0% = AED 0

  • Portion of taxable income exceeding AED 375,000 (i.e. AED 400,000 - AED 375,000 = AED 25,000) at 9% = AED 2,250

  • The UAE CORPORATE TAX liability for the year will be AED 0 + AED 2,250 = AED 2,250

  • The final amount of UAE CORPORATE TAX payable will be reduced by any foreign taxes incurred on the relevant income (see below under ‘Tax Credits’ section)


    • Exemption

    Businesses engaged in the extraction of natural resources will remain subject to Emirate level corporate taxation and be outside the scope of UAE CORPORATE TAX

    Dividends and capital gains earned by a UAE business from its qualifying shareholdings will be exempt from UAE CORPORATE TAX

    Foreign entities and individuals, if they don’t conduct a trade or business in the UAE in an ongoing or regular manner

    UAE CORPORATE TAX will generally not be levied on a foreign investor’s income from dividends, capital gains, interest, royalties and other investment returns


    Free Zones

    Free zone businesses will be subject to UAE CORPORATE TAX, but the UAE CORPORATE TAX regime will continue to honor the CORPORATE TAX incentives currently being offered to free zone businesses that comply with all regulatory requirements and that do not conduct business with mainland UAE.

    The UAE CORPORATE TAX treatment that will apply to businesses in free zones will be the same across all free zones.


    Losses

    The UAE CORPORATE TAX regime will allow a business to use losses incurred (as from the UAE CORPORATE TAX effective date) to offset taxable income in subsequent financial periods

    A loss for CORPORATE TAX purposes (tax loss) would arise when the total deductions the businesses can claim are greater than the total income for the relevant financial period

    Excess tax losses may be carried forward and used against taxable income in future years, provided certain conditions are met

    Tax losses from one Group Company may be used to offset taxable income of another group company, provided certain conditions are met further information on the group loss utilisation rules will be provided in due course


    Administration

  • Will businesses be required to register for UAE CORPORATE TAX purposes?

    • Yes. More information on the registration process and ongoing compliance obligations for businesses will be provided in due course

  • How often will UAE businesses need to file a UAE CORPORATE TAX return?

    • Only one CORPORATE TAX return will need to be filed per financial period. No provisional or advance CORPORATE TAX filings will be required A financial period is generally a year

  • Will the CORPORATE TAX return need to be filed electronically?

    • The CORPORATE TAX return will need to be filed electronically. Further guidance will be issued in this regard in due course

  • Will businesses be required to pay tax in advance?

    • UAE businesses will not be required to make advance UAE CORPORATE TAX payments