Introducing UAE Corporate Tax – An Overview

By Kitaab

In the ever-evolving landscape of international taxation, the Corporate Tax in UAE introduces a new dimension. This is a call necessitating strategic planning and adaptation.

As we navigate this new chapter in taxation, staying informed and proactive is key for businesses that aim for strategic advancement in the upcoming era of Corporate Tax in the UAE. Here's a quick rundown of what you need to know about the new tax system.

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Corporate Tax in UAE

The new Corporate Tax in UAE was made applicable for all financial years starting on or after 1st June 2023. Any business that adopts a fiscal year starting after 1st June 2023 and afterward shall file their Corporate Tax return towards the year ending 2024, and thereafter every financial year based on their fiscal year.

Who is in the scope of Corporate Tax?

All businesses and commercial activities operating within the seven Emirates are in the scope. The exceptions are:

Extraction of Natural Resources Business (since it is subject to separate Emirate Taxes)
Income earned in the personal capacity of an Individual (investment, salary income, etc.)
Businesses registered in eligible free trade zones

Rate of Corporate Tax in UAE

All businesses having annual taxable profit up to AED 375000 are not taxable. Businesses having annual taxable profit of more than AED 375000 are taxable at 9%. Taxable profit shall be determined in such manner as prescribed by the UAE corporate tax law adjustments.

General Exemptions from uae corporate tax are:

Dividend Income by UAE corporate from its qualifying shareholdings
Capital Gains
Profits arising from Group restructuring
Profits arising from Intra Group transactions

Qualifying Free Zone Business

All businesses having qualifying business in the qualifying free zone shall be subjected to zero percentage tax on such income derived from the Qualifying Free Zone. Income from immovable properties in a QFZ is subject to uae corporate tax at 9%. This benefit shall expire by the end of the tax incentive period.

Only juridical persons can benefit from the Free Zone UAE Corporate Tax regime. This includes any public or private joint stock company, limited liability company, limited liability partnership and other types of incorporated entities that are established under the rules and regulations of the Free Zone.

Transfer Pricing will gain more importance in UAE business since the transactions between group companies/businesses under common control shall be under close review with UAE Corporate Tax Law implementation.

Losses of a tax year shall be allowed to carry forward subject to the guidelines.

Tax Groups can be formed according to the law, for entities having the same ownership subject to the regulations to file a consolidated tax return.