- February 10, 2023
- Posted by: Shuraa Tax Consultant
- Categories: Dubai Tax System, UAE Taxation
The implementation of corporate tax in the UAE has been scheduled for June 1, 2023. The law mandates that starting with their first fiscal year beginning on or after June 1, 2023, taxable individuals and businesses would be subject to a 9% corporate tax and they should also obtain UAE corporate tax registration number.
Businesses and tax experts have been talking about in detail since the first announcement. With this declaration, the UAE is on track to pass the GCC’s other three nations to become the fourth to enact a federal business tax.
The UAE is introducing corporate tax to advance the nation’s status as a premier global hub for commerce and investment as well as quicken the strategic goal of growth and transformation. Additionally, corporate tax helps avoid detrimental tax tactics and complies with international requirements for tax transparency.
Exempt and Taxable Persons for UAE Corporate Tax
Given their significance and contribution to the social fabric and economy of the UAE, several types of companies or organizations are exempt from corporate tax. These are referred to as Exempt Persons and consist of:
|Automatically Exempted||Government entities Government controlled entities specified by the cabinet decisions|
|Exempted if notified to the Ministry of Finance (subject to certain conditions)||Extractive Business Non-Extractive Natural Resource Business|
|Exempt if listed in a cabinet decision||Qualifying Public Benefit Entities (PBE)|
|Exempt if applied to and approved by the Federal Tax Authority (subject to certain conditions)||Public or private pension and social security funds. Qualifying Investment Funds Wholly owned & controlled UAE subsidiaries of a government entity|
Government Entities, Government Controlled Entities that are listed in a Cabinet Decision, Extractive Businesses, and Non-Extractive Natural Resource Businesses may all be exempt from being subject to Corporate Tax filing and compliance in addition to being exempt from corporate tax registration requirements imposed by the Corporate Tax Law, unless they engage in activities that are subject to the charge of Corporate Tax.
What types of enterprises or sources of income fall outside the corporate tax’s purview?
All enterprises that make more beyond the AED 375,000 profit threshold must pay corporate tax. But some forms of revenue or business are free from corporate tax. The list of businesses or income free from corporate tax is as follows:
- Corporate tax will not apply to individuals’ income. As a result, all personal income that is unconnected to a trade or business in the UAE will be free from corporate tax, including income from employment like salary, real estate, interest income, share investments, and other sources of income.
- Foreign investors who do not conduct business in the UAE will obviously not be subject to corporate tax.
- Businesses operating in free zones that abide by all regulatory criteria will still continue to receive corporate tax advantages.
- Corporate tax will not apply to capital gains or dividends that UAE corporations or individuals earn from their qualifying shareholdings.
- Not applicable to intragroup transactions that qualify as tax group.
Documents needed for UAE corporate tax registration
Businesses must prepare to provide the necessary paperwork in order to register for Corporate Tax in the UAE. There will be an online registration and payment processes in place for corporate tax. Business entities must submit the following documents in order to register for corporate tax in the UAE.
- Valid Trade License Copies
- Valid Copy of the license holder’s or partners’ passport
- Applicable & Valid Emirates ID of the license’s owner or partners
- Power of Attorney or Memorandum of Association
- Details about the concerned person’s contacts (Mobile Number and E-mail)
- Contact information for the business (complete address and P.O. Box)
- Lastly, business activity details
Who should register for UAE Corporate Tax (CT)
There is no registration threshold for UAE CT like VAT registration. However, CT registration is mandatory for all companies in UAE and individuals engaged in business activities in UAE.
CT registration is mandatory for all free zones in UAE , as well as mainland companies, off-shore companies in all emirates in UAE.
Further, CT registration is mandatory for foreign companies having permanent establishment in UAE or for foreign entities, where control and management is in the UAE.
However, the FTA may request certain exempt persons to register for Corporate tax.
Additionally, two or more taxable persons can register as a UAE tax group for corporate tax purposes subject to certain conditions.
What is the UAE’s corporate tax rate?
A fixed proportion of net profit must be paid as corporation tax by all enterprises whose taxable profit (net) exceeds AED 375,000.
The following CT rates apply to UAE businesses and taxable person :
- 0% – for taxable income up to AED 375,000.
- 9% – for taxable income exceeding AED 375,000.
Entities from qualifying free zones are subject to the following CT rates:
- 0% – on qualifying income.
- 9% – on income other than qualifying income.
Any net profit that a Qualifying Free Zone Person earns from international business or UAE Free zone business is put as “Qualifying Income.”
When should you register for corporate tax in the UAE?
The federal tax office of UAE has assigned the registration process in accordance with the corporate tax law. Additionally, businesses in the UAE will have up to nine months from the conclusion of the applicable tax period to file their tax return and pay the federal corporation tax, according to the Ministry of Finance.
Early UAE Corporate Tax Registration
Ahead of its implementation later this year, the UAE has begun early corporate tax registration for a select group of functioning businesses.
The Federal Tax Authority of the United Arab Emirates said in a statement on 22nd January 2023 that the selected businesses will be sent invitations to register utilizing the Emara Tax platform for digital services. Therefore, companies with FY starting on 1st June 2023 are prioritized for registration purpose as of now.
With the best corporate tax services, accounting services, and audit services available, Shuraa Tax can assist your business in overcoming common obstacles like unfamiliarity with corporate tax laws and transfer pricing regulations, as well as compliance issues, a lack of resources, and a noncompliant accounting system. Reach out to Shuraa Tax Consultants & Accountants for any details pertaining to UAE Corporate Tax Registration. Call or text us at +971 508912062 and +971 508912403 or send an email to email@example.com