The United Arab Emirates is set to introduce the first Direct Tax in its history, Corporate Income Tax, honoring International Taxation Practices and diversifying income sources. It is time for business entities to prepare themselves for the change. As a result, a lot of queries pop up! Nex Consultants has consolidated the frequently asked questions. You can find it under our Blogs & Articles and Corporate Tax in UAE on our website www.nexconsultants.com.
Why is the introduction of Corporate Income Tax a progressive step and a laudable move?
“The certainty of a competitive and best in class Corporate Tax regime, together with the UAE’s extensive double tax treaty network will cement the UAE’s position as a world-leading hub for business and investment. The introduction of a Corporate Tax regime will help the UAE achieve its strategic ambitions and incentivize businesses to establish and expand their activities in the UAE”, says His Excellency Younis Haji Al Khoori, Undersecretary of the Ministry of Finance (MoF)
Businesses have long quit the Brick and Mortar format and have evolved, fading away from the concept of physical borders. The virtual world connects and unites the whole globe. This has also led to Tax Avoidance and Base Erosion Profit Shifting Practices. It is impertinent for every responsible government to adopt progressive policies to Prevent Tax Evasion without impeding business growth. More than 135 countries have approved the two pillar solution to which UAE is a signatory. Moreover, Taxation as a policy would bring in more financial discipline and transparency, which is a sign of a matured economy.
Are you taxable, and what are the applicable Tax Rates?
Do you own a trade license to carry out a commercial activity in the Mainland of UAE? Then, yes, you are taxable! Except for the income from the extraction of natural resources, every other business conducting trade on the Mainland comes within the purview of CIT. Any other exceptions can only be known after the enactment of the Law.
The proposed Corporate Income Tax introduces a 3-tier system, and the rates are as follows:
– Annual taxable profits below or equal to AED 375,000 shall be subject to a zero rate.
– Annual taxable Profit above AED 375,000 shall be subject to a 9 percent rate.
– Multinational Entities within the scope of OECD Base Erosion and Profit Shifting rules will face a differential treatment that is yet to be announced.
We at Nex Consultants will be grateful to assist you in incorporating your venture into this city with utmost confidence.
How will Dubai maintain its position as the most favorable destination for investors?
“Tax Free” is not the only reason for making UAE and Dubai the most desirable destination for you to set up your dream business.
Rule of Law and Certainty of Legal framework: Rule of this country is not snapped now and then. There are few fluctuations in the legal framework, and visionary rulers of this country will not shock you with an abrupt policy amendment
Unique location: This city is right at the center of the world! Halfway between the east and the west, it connects every continent and culture.
Ownership: You are very well deserved to own your hard work in Dubai, be it a free holding property or a business.
Business Ease: With umpteen free zones and simple & clear compliance formalities, it is pretty smooth and accommodating to set up and conduct business in UAE. With no withholding tax, it still houses innumerable holding companies.
Lowest CIT Rate. Around the globe, 9% is still the lowest among major economies compared to neighboring GCC Countries or other business destinations. Incorporating your business into a stable & credible economy will add to your authenticity.
Financial Year
The Corporate Tax will be effective for the financial years starting from on or after 1 June 2023.
Any Business adopting the financial year from 1 July 2023 to 30 June 2024 will be subject to corporate Tax from 1 June 2023.
Any Business adopting the financial year from 1 January 2023 to 31 December 2023 will be subject to corporate Tax from 1 January 2024.
Unlike the VAT law that follows quarterly filing, Corporate income tax filing must be done annually.
Taxable Amount
The Net Profit of a business, after the allowed exceptions and deductions, shall be taxable.
The Profit exceeding AED 375,000 shall be liable to be considered for the Tax.
Salary or any other income related to the employment of an individual.
Interests and other income from bank deposits and saving schemes.
Profits from Intra-group transactions and group reorganization.
Dividends, Capital gains, or any other investment income earned by holding equity investments
and income received from real estate does not require a trade license to carry out their activity.
A natural person conducting commercial activity does come within the ambit of Corporate income tax. Every Tax legislation provides ample room for rebates, deductions, and exemptions; companies only follow the procedures. With Nex Consultants, we assure the transition will be trouble-free; you can concentrate on your business without worrying about the change in the Law and the Corporate Tax-related process.
Incorporate your ideas & hard work in Dubai, this city of dreams will never disappoint you.
Know more about Corporate Income Tax in UAE, Contact Nex Consultants
