Corporate Tax Law in UAE : A Comprehensive Guide

The introduction of the Corporate tax law in UAE reflects commitment to long-term economic sustainability as well as its status as a worldwide business and investment hub. The government has designed the UAE Corporate Tax law to be competitive and attractive to businesses, while also ensuring a diversified revenue stream for the country. 

In this detailed guide, we will look at the important components of UAE corporate tax law and provide a comprehensive overview of everything you need to know about including its key features, applicability, and how to ensure compliance.

Overview of the UAE Corporate Tax Law

The UAE corporation tax law, officially known as Federal Decree-Law No. 47 of 2022, becomes effective on June 1, 2023. The aim of the law is to diversify the country’s revenue streams while maintaining its attractiveness for business and investment.

Key Provisions of the UAE Corporate Tax Law

Here’s a breakdown of the key points which will help you to understand better about the corporate tax law in UAE –

• Taxable Persons – The law applies to the majority of businesses that function within the UAE, with some limitations. This includes onshore businesses (mainland), free zone entities (with limitations), and branches of foreign companies.

• Taxable Income – Corporate tax in Dubai is levied on a company’s taxable income, which is essentially the net profit as reported in the financial statements after accounting for specific additions and deductions allowed under the law.

• Tax Rates – The UAE implements a progressive tax system for corporate income –

• 0% Tax Rate – There is no tax applied to businesses whose taxable income is less than AED 375,000 (about USD 102,000). No matter how many enterprises a taxable person operates, they are all eligible for this exemption.

• 9% Tax Rate – The UAE’s standard corporate tax rate is 9% for taxable income exceeding AED 375,000.

• 15% Tax Rate (for Specific Cases) – A higher 15% tax rate applies to multinational corporations that meet specific criteria under the OECD’s Base Erosion and Profit Sharing (BEPS) 2.0 framework, particularly those with global group revenue exceeding AED 3.15 billion.

Who is Exempt from Corporate Tax in UAE?

In June 2023, the UAE implemented a corporate tax system, but some entities are exempt.

Here’s a breakdown of the main exemptions for businesses –

1. Qualifying Free Zone Persons (QFZPs)

This is an important advantage for companies that operate in the UAE’s approved Free Zones. A legal entity needs a valid QFZP certificate in order to be eligible for a 0% corporate tax rate on their qualified income.

But there’s a catch –

• Only income generated within the Free Zone and meeting specific criteria qualifies for the 0% tax rate.
• The ordinary corporate tax rate of 9% may apply to any revenue obtained from the UAE mainland or from sources other than the Free Zone. 

2. Specific Industries

There are certain industries that might be eligible for additional tax advantages, such as full exemptions or lowered rates. These, however, change and are based on the particular industry as well as its rules and regulations.

Here’s what you should do –

• Consult with a tax professional to determine if your industry or business structure qualifies for any exemptions.
• They can assist you in navigating the tax implications for revenue made outside of the Free Zone as well as the unique criteria for QFZPs.

The Benefits of Corporate Tax Law in UAE

The UAE has made a strategic change with the introduction of business tax. It offers possible advantages for organizations, even though it can require some extra considerations –

• Increased Transparency and Alignment – The UAE’s corporate tax regime aligns the country with international best practices, fostering greater transparency and financial stability.

• Focus on Long-Term Growth – The tax revenue generated can be directed towards infrastructure development, social programs, and economic diversification initiatives, ultimately benefiting businesses in the long run.

• Predictability – The law provides a clear and predictable tax framework, reducing uncertainty and allowing businesses to set up and invest more successfully.

• Compliance Requirements – This law makes sure that tax laws are followed, which may necessitate the use of strong internal controls and even tax advice services.

Navigating the New Corporate Tax Landscape

It is crucial for companies doing business to understand and abide by the Corporate Tax Law in UAE. Start Any Business can guarantee a seamless transfer for your business by offering complete support throughout the process.

Here’s additional information about how our team will assist you –

• Business Registration and Tax Compliance – Our team of experienced professionals can guide you through the business registration process, ensuring your company is compliant with the new tax regulations. On your behalf, we will take care of all the required documentation and communicate with the appropriate authorities.

• Tax Structuring and Planning – Our tax experts will collaborate directly with you to understand your financial objectives and business plan. We can then develop tax-efficient structures that optimize your tax position and help you identify potential exemptions or deductions you might qualify for. This may involve strategies such as utilizing free zone benefits, optimizing capital allowances, and structuring your business operations efficiently.

• Tax Filing and Reporting – We can take this burden off from you by appropriately preparing and completing your company tax filings at Start Any Business. Our team assures that electronic submissions to the Federal Tax Authority (FTA) are made on time and that you are kept up to date on upcoming due dates and changes to tax regulations.

Conclusion

The implementation of corporation tax law in UAE welcomes a new era for companies that work within the region. By understanding the law’s provisions and seeking professional guidance, you can navigate this change effectively and ensure your business continues to thrive in the UAE’s dynamic economic landscape.

Start Any Business can guide you through the entire business setup in dubai process, ensuring you comply with the new Corporate Tax Law in dubai and maximize your success in the UAE. 

Also Read: How To Get Consultancy License in Dubai, UAE: A Comprehensive Guide