The Federal Decree-Law No. (47) of 2022 on the Taxation of Corporations and Businesses (“Corporate Tax Law”) was issued by the United Arab Emirates (“UAE”), on 09 December 2022. The Corporate Tax Law provides the legislative basis for the introduction and implementation of a Federal Corporate Tax (“Corporate Tax”) in the UAE and is effective for financial years starting on or after 1 June 2023.
Highlights of Corporate Tax in UAE
• Corporate Tax will be levied at an applicable rate of 9% on Taxable Income exceeding AED 375,000. Taxable Income below this threshold will be subject to 0% rate.
• Corporate Tax Registration Number to be obtained by all Taxable Persons (including Free Zone Persons).
• All Taxable persons will be required to file an annual Corporate Tax Return.
• A Free Zone Person that is a Qualifying Free Zone Person can benefit from a preferential Corporate Tax rate of 0% on their “Qualifying Income” only. Cabinet will issue the decision on ‘Qualifying income’ later.
• Transfer Pricing adjustments shall be applicable in case of transactions between related / connected persons even for domestic transactions and its documentation shall be mandatory including maintenance of master file and local file.
To Whom UAE Corporate Tax is Applicable
• Juridical persons incorporated in the UAE
• Juridical persons effectively managed and controlled in the UAE
• Foreign juridical persons that have a permanent establishment in the UAE
• Individuals engaged in a business or business activity in the UAE, either directly or through an unincorporated partnership or sole proprietorship.
To Whom UAE Corporate Tax is Exempted
- The UAE Federal and Emirate Governments and their departments, authorities and other public institutions
- Wholly Government-owned companies that carry out a mandated activity, and that are listed in a Cabinet Decision;
- Businesses engaged in the extraction of UAE natural resources and related non-extractive activities that are subject to Emirate-level taxation after meeting certain conditions;
- Public Benefit Entities that are listed in a Cabinet Decision;
- Investment Funds that meet the prescribed conditions;
- Public or private pension or social security funds that meet certain conditions; and
- UAE juridical persons that are wholly-owned and controlled by certain exempted entities after meeting certain conditions.
HOW NEX CONSULTANTS CAN ASSIST
NEX CONSULTANTS can help and advise on corporate tax and VAT in the UAE and can provide news and updates on all the latest tax developments. Contact us for any additional clarifications and support. Our corporate tax consultants can contact and provide cutting edge advise on tax matters .
Sources : The National News, MOF Website
FREQUENTLY ASKED QUESTIONS (FAQ)
Who is subject to UAE Corporate Tax?
Both resident and non-resident entities conducting any business through a Permanent Establishment in the UAE are subject to Corporate Tax.
Will UAE entities owned by UAE or GCC nationals be subject to UAE Corporate Tax?
Yes, UAE entities owned by UAE or GCC nationals will be subject to UAE Corporate Tax if they are conducting any business through a Permanent Establishment in the UAE.
Will UAE Corporate Tax apply to businesses in all Emirates?
Yes, the UAE Corporate Tax will apply to businesses in all Emirates.
Will I have to pay UAE Corporate Tax alongside Emirate-level taxes?
This will depend on the specific regulations of each Emirate.
Will UAE Corporate Tax replace VAT in the UAE?
No, the UAE Corporate Tax will not replace VAT in the UAE. They are two separate taxes and will coexist.
Will I have to pay UAE Corporate Tax alongside VAT in the UAE?
Yes, entities subject to UAE Corporate Tax will also be subject to VAT if they are conducting taxable supplies.
