General Tax Rates per UAE Corporate Tax
| Details of Income | Tax Rate |
|---|---|
| Taxable Profit up to AED 375,000/- in a tax year | 0% |
| Taxable Profit above AED 375,000/- in a tax year | 9% applicable on the excess profit of AED 375,000/- |
Corporate Tax Overview
Corporate Tax In UAE
Corporate Tax is the direct tax imposed on the profit of business or business activities in the UAE.
Corporate Tax in UAE is implemented from 01st June 2023. Federal Decree Law No.47 of 2022 on the Taxation of Corporations and Businesses has been published on 09th December 2022.
Know Your Corporate TaxGeneral Tax Rates per UAE Corporate Tax
Corporate Tax is imposed on the taxable profit from business or business activities. Below are the Corporate Tax rates applicable in UAE
Tax Rate for Free Zone person
| Details of Income | Tax Rate |
|---|---|
| Qualifying Income | 0% |
| Non-Qualifying Income | 9% |
Applicability of Corporate Tax
Corporate Tax in UAE will be applicable to taxable persons based on the financial year of the taxable person
Example: –
If the financial year of the company is from June to May, Corporate Tax will applicable from 01st June 2023.
If the financial year of the company is from January to December, Corporate Tax will applicable from 01st January 2024.
If the financial year of the company is from April to March, Corporate Tax will be applicable from 01st April 2024.
Exempt person from UAE Corporate Tax
Below are exempted from UAE Corporate Tax
Automatic Exemption
(Corporate Tax registration not required)
- Government entities
- Government Controlled entities
- Extractive and Non-extractive natural resource businesses
Exemption against application
(Corporate Tax Registration required)
- Public Pension or Social Security fund
- Private Pension or Social Security fund
- Qualifying Investment fund
Exempt Income
Below incomes are exempted while calculating Corporate Tax
- Dividend or profit received by a UAE-taxable person from another UAE-taxable entity.
- Participation Exemption, subject to conditions
- Foreign permanent establishment exemption
- International transportation exemption
Deadline for Corporate Tax returns and payment
All Taxable persons must file the Corporate Tax return and make the Corporate Tax due within 9 months from the end of relevant tax year.
Small Business Relief
Small Business Relief is announced by UAE Authority to support start-ups and other small or micro businesses which helps to reduce the Corporate Tax burden and compliance Cost.
Small Business Relief is applicable till 31st December 2026 and those resident taxable person whose annual gross turnover is less than 3 million dirham in all tax years till 31st December 2026 will be eligible for Small Business Relief. Those who are eligible for the Small Business Relief can file a simplified Corporate Tax return.
Record Keeping
All taxable person must maintain all the relevant records related to Corporate Tax return for 7 years following the taxable year.
Accounting Standard
All companies must follow Accrual basis of accounting. Below are the accounting standard/ reporting standard which can be opted as per UAE Corporate Tax Law.
- Cash Basis of Accounting- If the annual turnover is less than 3 Million Dirham.
- IFRS for SMEs – If the annual turnover is less than 50 Million Dirham.
- IFRS- For those taxable person whose annual turnover is more than 50 Million Dirham.
Requirement to maintain Audited Financial Statement
Below taxable person shall maintain an audited financial statement for UAE Corporate Tax purposes.
- Taxable person whose annual turnover is more than 50 Million
- Qualifying Free Zone
Currency
The taxable person shall compute the tax in AED (United Arab Emirates Dirham). If the function currency is a foreign currency, the transactions need to be converted to AED at the exchange rate approved by UAE Central Bank.
Withholding Tax
Withholding Tax rate as per UAE Corporate Tax is 0%
Related Party Transactions and Transfer Pricing Document
All Related party transactions must be at Arm’s Length Principle and Transfer pricing documentation is mandatory if;
- The UAE entity’s turnover is more than 200 Million Dirhams in a taxable year
- If the UAE entity is part of a Multi-National Entity (MNE) and the global turnover exceeds 3.15 Billion Dirhams in a taxable year.
Frequently Asked Questions
If a UAE registered company who is making loss is falling under UAE Corporate Tax Law?
Yes, irrespective of profit or turnover, all the companies registered in UAE shall comply with UAE Corporate Tax Law.
Can a company change the Corporate Tax period?
Yes, Company should submit an application to Federal Tax Authority to change the Corporate Tax period. However, the company should not change Corporate Tax period without valid commercial reasons.
How much will be the Corporate Tax payment of a company who is making AED 500,000/- taxable profit
Up to AED 375,000/- 0%
Above AED 375,000/- 9% i.e. AED 125,000 * 9% = AED 11,250/-
UAE Company earning income from outside UAE will be subject to Corporate Tax in UAE?
Yes, UAE company is considered as resident of UAE and worldwide income of resident will be subject to UAE Corporate Tax
Can a company allowed to form multiple businesses to save Corporate Tax in UAE?
As per Article 50 of UAE Corporate Tax Law, UAE companies are not allowed to make structural changes for tax evasion purposes (General Anti-Avoidance Rule)
What will be the penalty for late Corporate Tax return filings?
AED 1,000 in case of late submission of the application and on the same date monthly, up to a maximum of AED 10,000. Read for more administrative Penalties as per UAE Corporate Tax Law https://www.flyingcolourtax.com/blog/provisional-tax-penalties-guide/
Can a company keep soft copy of records related to UAE Corporate Tax?
Yes, the documents can be kept either in hard copy of soft copy which shall be retrievable easily.
How the Corporate Tax return shall file and make payment?
The filing of Corporate Tax return and making due payment shall be electronically in the given portal from Federal Tax Authority.
A company who is eligible for Small Business Relief should register for Corporate Tax?
Yes, the relief of Small Business can be obtained only when filing the Corporate Tax return. Thus, registration for Corporate Tax is mandatory. Read more about small business relief https://www.flyingcolourtax.com/blog/ministry-of-finance-issued-ministerial-decision/
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