Effective for financial years beginning on or after 1 June 2023. A business that has a (calendar year) financial year starting on 1 January 2023 and ending on 31 December 2023 will become subject to UAE CT from 1 January 2024 (which is the beginning of the first financial year that starts on or after 1 June 2023).
Business income earned under a commercial license (including freelance license/permits, real estate management, construction, development, agency, and brokerage activities) will be within the scope of UAE CT
Apply to all businesses and commercial activities in UAE except for the extraction of natural resources which will remain subject to Emirate level taxation.
Applicable on the accounting net profits of UAE businesses as reported in their financial statements prepared in accordance with internationally acceptable accounting standards.
Tax Rates
- Nil tax for taxable profit up to AED 375,000
- thereafter tax rate will be 9%.
- This approach has been adopted to support small businesses and startups.
- Example: CT liability of a company making taxable income of AED 400,000 will be AED 2,250 (9% on income above AED 375,000 = 9% of AED 25,000)
- There will be a different tax rate for large multinationals (that have consolidated global revenues above EUR 750 million).
Free zone businesses will be within the scope of UAE CT and required to register and file a CT return but will continue to benefit from CT holidays / 0% taxation if they comply with all regulatory requirements and do not conduct business in mainland UAE.
UAE withholding tax (tax collected at source by the payer on behalf of the recipient of the income) will not be applicable on domestic and cross-border payments of any nature under the UAE CT regime.
UAE businesses will need to comply with transfer pricing rules and documentation requirements in line with OECD Transfer Pricing Guidelines
Individuals could be subject to UAE CT on taxable income from trade/ business in UAE.
No UAE CT will apply to:
- Employment income, income from real estate, income from savings, investment returns and other income earned by individuals in their personal capacity that is not attributable to a UAE trade or business.
- Dividends, capital gains, and other investment returns earned by foreign investors.
Exemption from UAE CT will be available for:
- Capital gains and dividends earned from qualifying shareholdings.
- Qualifying intra-group transactions and restructurings.
Other features
- Losses incurred (as from the UAE CT effective date) can be carry forward and used against to offset taxable income in subsequent financial periods.
- UAE CT will have to be filed electronically once for each financial period.
- No provisional or advance corporate tax filings will be required
- Foreign CT paid on UAE taxable income will be allowed as a tax credit against the UAE CT liability
- UAE group companies can form a tax group and file a single tax return for the entire group, and transfer tax losses to other members of the group.
- The Federal Tax Authority will be responsible for the administration, collection, and enforcement of UAE CT
- Ministry of Finance will remain the “competent authority” for the purpose of agreements and exchange of information for tax purposes.
You may please go through the FAQs at https://www.mof.gov.ae/en/resourcesAndBudget/Pages/FAQ.aspx Further information is expected to be released by mid of 2022. We will keep you updated with the latest information on UAE CT time to time.