Tax Agency Number (TAN) 30004113
Many businesses in the UAE have historically enjoyed zero income tax on their profits. This, however, is set to change, with the Ministry of Finance (MOF) announcing on 31 January 2022 that federal corporate income tax (CIT) will be introduced in the UAE. The CIT regime is expected to apply for fiscal years starting on or after 1 June 2023.
This move is motivated by UAE's desire to meet international tax standards, following similar moves in neighbouring Gulf states, while minimising the compliance burden for UAE businesses and shielding small businesses and start-ups. The UAE, home to the key business hub Dubai, will still have one of the lowest corporate tax rates in the world.
Corporate Tax is a form of direct tax levied on the net income or profit of corporations and other businesses. Corporate Tax is sometimes also referred to as “Corporate Income Tax” or “Business Profits Tax” in other jurisdictions.
A competitive CT regime based on international best practices will cement the UAE’s position as a leading global hub for business and investment, and accelerate the UAE’s development and transformation to achieve its strategic objectives
Introducing a CT regime reaffirms the UAE’s commitment to meeting international standards for tax transparency and preventing harmful tax practices
he UAE CT regime will become effective for financial years starting on or after 1 June 2023
Examples:
The UAE CT is a Federal tax and will therefore apply across all Emirates
UAE CT will apply to all UAE businesses and commercial activities alike, except for the extraction of natural resources, which will remain subject to Emirate level corporate taxation
All activities undertaken by a legal entity will be deemed “business activities” and hence be within the scope of UAE CT
This would generally be done by reference to the individual having (or being required to obtain) a business licence or permit to carry out the relevant commercial, industrial and/or professional activity in the UAE
The CT rates are:
A multinational corporation is a corporation that operates in its home country, as well as in other countries through a foreign subsidiary, branch or other form of presence / registration. Merely earning income from outside its home country without a foreign presence or registration would not make a business a multinational corporation
In the context of the global minimum effective tax rate as proposed under 'Pillar Two' of the OECD Base Erosion and Profit Shifting project,” large” refers to a multinational corporation that has consolidated global revenues in excess of EUR 750m (c. AED 3.15 bn)
UAE CT will not apply on an individual’s salary and other employment income (whether received from the public or private sector)
Business income earned under a commercial license will be within the scope of UAE CT
UAE CT will generally apply to income earned from activities carried out under a freelance license / permit, albeit no CT will be payable unless the annual net income of the freelance professional exceeds AED 375,000.
Interest and other income earned by an individual from bank deposits or saving schemes will not be subject to UAE CT
The CT liability will be calculated as follows:
Free zone businesses will be subject to UAE CT, but the UAE CT regime will continue to honour the CT incentives currently being offered to free zone businesses that comply with all regulatory requirements and that do not conduct business with mainland UAE
A business established in a free zone will be required to register and file a CT return
The UAE CT treatment that will apply to businesses in free zones will be the same across all free zones
Related Link : Dubai Corporate Tax Consultancy | UAE CT 2023 | Tax Audit | Corporate Tax Registration
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