AURA Business Services |

AURA Business Servics Logo | Best solutions for your business in Dubai

CORPORATE TAX CONSULTANCY

Understanding Corporate Tax in UAE

Corporate Tax in UAE: The Ministry of Finance (MOF) in the United Arab Emirates has revealed its decision to implement federal corporate income tax in the UAE, effective from 1 June 2023. This announcement marks a significant shift from the UAE government’s previous stance of not taxing profits generated by companies and organizations in the country—a policy that has long contributed to the UAE’s allure as an attractive destination for foreign investment.

Corporate Tax Registration
Starting From Just 
1000 AED
* Terms & Conditions Applied

The UAE’s forthcoming corporate tax system aims to establish a flat corporate tax rate across the nation, aligning with international standards. This strategic move is driven by the UAE’s commitment to meeting global tax requirements while ensuring minimal compliance burdens for businesses. Notably, the implementation of a flat tax rate will provide protection for start-ups and small enterprises, preserving the UAE’s status as one of the jurisdictions offering the lowest corporate tax rates worldwide.

Navigating Corporate Tax in UAE: A Comprehensive Guide

The United Arab Emirates is set to implement a corporate tax rate of 9% on businesses generating over 375,000 AED (approximately USD $100,000) in net revenue starting from 2023. Conversely, businesses generating less than this threshold will remain subject to a 0% tax rate.

Furthermore, the UAE has announced that large multinational firms with profits exceeding 750 million euros or 750 million dollars will be required to pay a 15% tax. This measure aligns with the Global Minimum Corporate Tax Rate agreement.

The implementation of corporate tax in the UAE will commence for businesses with a tax year beginning on or after 1 June 2023.

Corporate Tax in UAE

UAE Corporate Tax 2023

The introduction of corporate tax in the UAE has brought about significant shifts in tax and compliance requirements for most UAE firms. Aura Vision Advisors stands ready to assist you with navigating the implications of the UAE Corporate Tax adoption. Our team of experts will ensure your firm is well-prepared to adapt to these changes.

The United Arab Emirates has implemented a corporate tax on business profits, which will be effective for financial years commencing on or after June 2023. UAE businesses are required to adhere to the OECD Transfer Pricing Guidelines concerning related-party transactions.

Tax Exemptions -UAE Corporate Tax

The UAE federal income tax exemptions encompass the following types of income:

  1. Dividend income earned by UAE companies.
  2. Profits stemming from group reorganization.
  3. Profits originating from intra-group transactions.
  4. Capital gains.

Tax Rates: Business Income

  1. 9% headline corporate tax rate for taxable income exceeding AED 375,000.
  2. effective tax rate for taxable income up to AED 375,000 to support small businesses and startups.

The impact of Corporate Tax on UAE businesses.

Each registered business would have to register for the corporate tax, and each year, they would be required to pay 9% of their adjusted taxable profits above the exemption threshold of Dh375,000. The CT would be their short-term liability, which would adversely affect their working capital. Businesses would consider this impact when preparing budgets for the respective period and plan accordingly.

UAE Tax Calculator (CT)

Example of business tax/UAE Corporate Tax Rates calculation in UAE

Details Amount
Net Profit
500,000
Less : All deduction**
25,000
Net Income
475,000
Less : Exempt Amount
375,000
Taxable Income
100,000
Corporate Tax @9% on
9000

Key Features: UAE Corporate Income Tax

Individuals will not be subject to corporate tax on income from employment, real estate, investment in shares or other personal income

No corporate tax/business taxes will apply on foreign investors who don’t carry on business in the UAE.

Corporate tax will apply on the adjusted accounting net profit of the business.

Free Zone business that meet all the necessary requirements, can continue to benefit from corporate tax incentives.

The extraction of natural resources will remain subject to Emirates level corporate taxation.

No withholding tax will apply on domestic and cross border payments.

No corporate tax will apply on capital gains and dividends received by a UAE business from its qualifying shareholdings.

No corporate tax will apply on qualifying intragroup transactions and restructurings.

Foreign tax will be allowed to be credited against UAE corporate tax payable.