The Ministry of Finance to introduce federal corporate tax on business profits, effective for financial years starting on or after 1 June 2023. The UAE designed corporate tax to minimize the compliance burden on businesses and to incorporate the best tax practice in UAE among the world . The companies will become subject to UAE corporate tax from the beginning of their first financial year that starts on or after 1st June 2023.
UAE Corporate Tax will apply to all UAE businesses, except for the extraction of natural resources, which will remain subject to Emirate level corporate taxation. As per the ministry Individuals will still not be subject to tax on their incomes from employment, real estate, equity investments or other personal income unrelated to a UAE trade or business.
Objective of UAE Corporate Tax.
- Make stronger UAE’s position as world leading for investment and businesses.
- Ensuring the international standards of tax transparency and preventing harmful tax practices.
- Enhancing the UAE’s growth and transformation to achieve its strategic objectives
Highlights of the Corporate Tax in UAE.
- 0% Tax rate for taxable income up to AED 375,000 to support small businesses and startups.
- 9% corporate tax rate for taxable income exceeding AED 375,000
- Companies trading in free zones and not conducting business in onshore UAE will continue to be exempt from corporate tax.
- Individuals will not be subject to corporate tax on income from employment, real estate, investment in shares or other personal income not related to a UAE trade or businesses.
- No corporate tax will apply on foreign investors who do not carry on business in the UAE
- Corporate tax will apply on the adjusted accounting net profit of the business
- The extraction of natural resources will remain subject to Emirate 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
- Generous loss transfer and utilization rules will be available to businesses
The Federal Tax Authority (FTA) is the government body that oversees the administration of taxes in the UAE.
NEX CONSULTANTS can help and advise on any matter related to tax in the UAE and can provide news and updates on all the latest developments.
Source : Federal Tax Authority
