Corporate Tax for UAE Businesses – Insights for Entrepreneurs

The corporate tax law in the UAE has yet again shifted and now seeks to tax businesses and corporations in Dubai and UAE at large. According to the Ministry of Finance (MoF), this is a federal tax obligation commonly known as corporate tax (CT). However, businesses have some time to adjust to the new shift because the corporate tax will take effect on June 1, 2023.

But what is the goal of this corporate tax in UAE? If you are planning to start a business in UAE or already have one, the CT will help both you and the country in the following ways:

• Meet international tax transparency standards and protect corporations and businesses from tax exploitation.
• Continue stamping authority as a leading global business hub and keep attracting foreign investors who will benefit the country.
• Meet the strategic objectives of the country as outlined by the government, national planner, and other stakeholders.

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The Corporate Tax Plan

According to MoF, this corporate tax is going to be the lowest in the region. All businesses should pay 9% of their income. This is a record low because some countries have very high CT rates. In fact, Dubai has had very high CT rates before. As such, this new move has been welcomed as businesses will pay no higher than 9%.

The tax will be levied on the net profit of any business that is above AED 375,000. Businesses making lower than this will not pay the corporate tax. The good thing is that the 9% is a flat rate for all businesses above AED 375,000.

However, taxation is a dynamic process, and many businesses or corporations do not understand how it works. As such, it is good to work with a professional tax consultant to help you understand corporate tax in UAE.

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Corporate Tax Compliant Businesses and Corporations

Corporations and businesses under a commercial license in the country, whether managed by an organization or individual, will be eligible for taxation. The banking and insurance operations are in the category, so they are also required to comply all the time. If you are in real estate, you have to know more about CT because you also qualify.

Freezone businesses have no option but to keep honoring the corporate tax as usual. The good thing is that the rate has now been made more friendly and there are no chances of tax exploitation.

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Corporate Tax Exemption

Any business that makes an income below AED 375,000 is exempted as mentioned.

Businesses that are subjected to UAE’s level corporation taxation framework such as natural resources extraction businesses will not pay the new CT. The corporations that qualify for intra-group by meeting all the qualifications will also have a sigh of relief.

The corporation tax is also not for individuals earning an income through employment, investment interest such as bank interest, and many other exceptions regarding individuals’ income.

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Conclusion

These insights are crucial for both newbies and seasoned entrepreneurs. Now that you know, it is time to get your business ready. As you know, failure to pay corporate tax is an illegal activity and you can be prosecuted for it, so plan well.