UAE Corporate Tax

The Federal UAE Corporate Tax Law, which will be applicable throughout all of the Emirates and to all corporate and commercial activities, will go into effect for the fiscal years beginning on or after 1 June 2023.

The UAE has implemented a series of tax reforms in the past few years to streamline its tax system and bring it in line with international best practices. These include Value Added Tax (VAT), Economic Substance Rules (ESR) and Country-by-Country Reporting (CbCR).

Objective of Corporate Tax:

• The UAE hopes to: Solidify its position as a major international hub for trade and investment.
• Accelerate its growth and change in order to fulfil its strategic goals.
• Reaffirm its commitment to eliminating unfair tax practises and upholding international norms for tax transparency.

Corporate Tax Applicability:

• All companies and people operating in the United Arab Emirates with a commercial licence.
• Enterprises located in free zones (The UAE CT regime will keep honouring the CT incentives now provided to free zone enterprises that abide by all legal requirements and do not have offices located on the UAE’s mainland.)
• Only foreign organisations and people who regularly and continuously conduct trade or commerce in the UAE are eligible.
• Banking activities.
• Businesses involved in real estate management, development, construction, agency, and brokerage.

Exemptions from Corporate Tax:

Below are the rules regarding exemptions from the corporate tax:

• Businesses involved in the extraction of natural resources are free from CT because they will continue to be subject to the present corporate taxation at the Emirate level.
• CT won’t apply to dividends or capital gains that a UAE business makes from its qualified shareholdings.
• If the prerequisites are satisfied, qualifying intra-group transactions and reorganisations won’t be subject to CT.

Corporate Tax Rate:

CT rates are, according to the Ministry of Finance:

• For taxable income up to AED 375,000, there is no tax.
• 9% of taxable income above AED 375,000 and
• Major multinationals that meet the requirements outlined in “Pillar 2” of the OECD Base Erosion and Profit Shifting Project will be subject to a different tax rate (which has not yet been determined).