Dubai Corporate Tax Consultants : The Ministry of Finance of the United Arab Emirates (UAE) announced on January 31, 2022 that the federal Corporate Tax (“CT”) would go into effect on June 1, 2023.
In response to the aforementioned announcement, the Ministry of Finance released a consultation document (“Consultation Document”) regarding the most prominent features of the CT legislation and its implementation in advance of its release.
Dubai Corporate Tax Rates
0% for taxable income up to AED 375,000;
9% for taxable income above AED 375,000
Dubai Corporate Tax Consultants : Corporate Tax in UAE Free Zones
Free zone businesses will be subject to corporate tax, and they will be required to file corporate tax returns, according to an announcement by the Ministry of Finance.
However, the Ministry of Finance has stated that the new regime will maintain the tax incentives currently offered to free zone establishments, provided they meet applicable regulatory requirements and do not conduct business onshore.
In the UAE, corporate tax will have an impact on market entry strategies and corporate structuring.
In order to operate in the UAE, companies must consider how corporate taxation may affect existing business structures, shareholding arrangements, agreements between group companies, their ability to utilize losses or other corporate tax reliefs, as well as whether proposed reorganizations or disposals qualify for corporate tax reliefs (such as the disposal of qualifying holdings or qualified intra-group transactions) or result in unexpected corporate tax liabilities.
Dubai Corporate Tax FAQs
Most of the businesses in the UAE do not pay corporate taxes. Free zone companies also generally enjoy a renewable, 50-year moratorium on corporate taxes. However, beginning 1 June 2023, all of the businesses in the UAE will have to pay corporate income taxes subject to exemptions.
The UAE corporate tax rate is 9%. It will apply to all the in-scope businesses that register a net income or a taxable income of AED 375,000 or more. This means the rate of tax will remain at 0% for small businesses whose taxable income does not exceed AED 375,000. Employment income earned by an individual will remain out of scope. However, if an individual’s income is from freelancing and other activities that the law requires must be licensed or have a permit, and the amount exceeds the AED 375,000 threshold, then that income would be subject to corporate income tax at 9%.
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