The Basics of Corporate Tax in the UAE You Should Know

Introduction: 

Do you think about opening a business in the United Arab Emirates or already have one and hear that the corporate tax rate in UAE will be applicable on June 1, 2023? In this article, we will introduce the basic information about corporate tax that you should know.

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What is corporate tax in UAE?

Generally, corporate tax meaning is a direct tax that is paid annually by a company on its net income or profit and other entities. It is also known as corporate income tax, company tax, or corporation tax. 

The Ministry of Finance announced that all businesses are subject to the UAE company tax rate from the beginning of their financial year, which starts on June 1, 2023. 

What is the corporate tax rate in UAE?

Corporations pay corporate tax according to certain rates that the government issues. The UAE company tax rates are:

• Corporations that have taxable income less than AED 375,000 will pay a 0% corporate tax rate in UAE.
• Corporations that have taxable income greater than AED 375,000 will pay a 9% corporate tax rate.
• The large multinational corporations that meet specific requirements outlined in Pillar 2 of the OECD Base Erosion and Profit Shifting Project are subject to a different tax rate, which is 15%. 

The responsibility for administering and collecting the corporation tax lies with the Federal Tax Authority (FTA). 

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To which business does the corporate tax rate in UAE apply?

The United Arab Emirates’ corporate tax rate is applied to:

1. All businesses and corporations that have commercial licenses to conduct commercial or industrial activities in the UAE. 
2. Foreign entities and individuals who conduct business activities on a regular basis in the UAE.
3. Banking operations.
4. Companies that work in real estate management, construction, real estate development, real estate agencies, and brokerage activities.

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To which business does the corporate tax rate in UAE not apply?

1. Activities of extraction of natural resources that are subject to Emirate level taxation.
2. Received capital profits from selling fixed assets.
3. Received profits from shares in the companies that are listed on the stock market.
4. Small and mid-sized businesses that have taxable income less than AED 375,000
5. Free zone businesses, but they have to be subject to the following requirements:

• Have to be licensed by a free zone authority.
• Conducting their activities within the boundaries of the free zone.
• Do not conduct any business activity on the UAE’s mainland.

6. Sort of charity, educational, and cultural activities according to specific terms in law.
7. Sort of sport activities according to specific terms in law.

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What is the aim of introducing the corporate tax rate in UAE?

Introducing the corporate tax rate in the UAE is not a normal procedure but rather a plan with objectives to advance the country and improve its economy. We can list the objectives as follows: 

• Attracting new investments:

The application of the 9% corporate tax rate in UAE compared to the rates in other countries is considered competitive, which attracts new investments in different fields such as industry, technology, and tourism. Thus, the UAE paves its way to being the global capital of business.

• Diversification of income sources: 

Taxes are a source of income for a country. By introducing corporate tax in the UAE, there will be a new source of income for the government away from oil revenue. The government will be capable of funding national projects and public services and improving the infrastructure. In this way, the quality of life in society and the sustainability of the economy in the future will be enhanced. 

• Supporting small and mid-sized businesses:

UAE corporate tax rate is not applied to businesses that have taxable income less than AED 375,000. Thus, the government supports the growth of these businesses and their contribution to the economy.

• Supporting sustainable development:

The government will use revenue from corporate tax to fund projects that ensure sustainable contributions in different fields, such as education and healthcare.

• Achieving equality:

The introduction of the corporation tax in Dubai aims to ensure that all businesses in the country contribute fairly to funding public services..

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Conclusion: 

As you have seen, we break down the basics of corporate tax in the UAE, including the corporate tax rate, the business that is applied to corporate tax, and the exemptions from it. Don’t let the new system of corporate taxation be an obstacle in your way of growing your business. Trust Alsun for Bookkeeping and Taxation to be your financial guide and partner. With our team of professional and experienced accountants and tax agents, we can provide a tax payment plan and manage your tax burden. 

Alsun is the right partner for you, as we are a FTA-registered tax agency in the UAE that has the expertise to handle tax and financial problems. We are fully aware of the regulations and laws of the UAE, focusing deeply on the Gulf region and business market, closely following the development of businesses, and we have an insight into the future of business and trade in the region. Our services are not limited to corporation tax in Dubai only; we also provide VAT and ESR services, in addition to bookkeeping, accounting, and CFO services. Let us take this task off of you and guide you to the best tax management.

Get in touch with Alsun now to discuss your requirements and tax situation and how we can help you calculate your corporate tax rate and pay your taxes on time. 

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