Corporate Tax Services in Dubai, UAE

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Corporate Tax In The UAE

In January 2022, the Ministry of Finance announced the implementation of Federal Corporate Tax (CT) on business net profits, effective from June 1, 2023. Corporate Tax, also known as Corporate Income Tax or Business Profits Tax, will apply to businesses starting from this date, with exceptions for certain exempt groups. This direct tax is levied on net income, with the UAE adopting a 9% rate, the lowest in the GCC, compared to the global minimum of 15% set by the G7 countries' agreement in 2021. The UAE’s decision to set the rate at 9% aims to mitigate the impact on entrepreneurs. Corporate tax applies to business entities, while individuals earning income without a commercial license are not subject to this tax.

Corporate Tax In

Corporate Tax Services in the UAE

In the UAE, corporate tax is structured as follows:

  • Net profit up to AED 375,000 is tax-free.
  • 9% tax on net profits exceeding AED 375,000.
  • Different tax rates for multinational corporations in accordance with OECD Pillar 2 guidelines on base erosion and profit shifting.

Importance of Corporate Tax in the UAE

The introduction of corporate tax in the UAE aims to foster a sustainable economy by enhancing corporate governance and bolstering the nation's economic strength. This tax policy is designed to position the UAE as a leading global business and investment hub, driving its development and transformation towards strategic goals. The corporate tax underscores the UAE's commitment to international standards for tax transparency and combating harmful tax practices.

Why Choose the UAE?

Why Choose the UAE?

Despite the introduction of corporate tax, the UAE remains a highly competitive market for conducting business globally. The UAE offers the lowest corporate tax rates compared to other major economies. For instance, France has a corporate tax rate of 26.5%, the United States has 21%, and India has rates of 25% for gross turnover up to INR 400 crore and 30% above that threshold. The Gulf Cooperation Council (GCC) countries have long attracted foreign investment due to their strategic locations and favorable tax rates. The UAE's lower corporate income tax rate further establishes it as an advantageous destination for global investments.

Scope of UAE Corporate Tax

Corporate tax in the UAE will apply to:

  • All businesses and individuals operating under a commercial license in the UAE.
  • Free zone businesses, with the corporate tax regime maintaining incentives for those that comply with legal requirements and do not operate from the mainland.
  • Foreign entities and individuals engaged in regular trade or business activities in the UAE.
  • Banking operations.
  • Companies involved in real estate management, construction, development, agency, and brokerage.
Exemptions from Corporate Tax in the UAE

Exemptions from Corporate Tax in the UAE

Certain entities are exempt from corporate tax in the UAE, including:

  • Businesses engaged in the extraction of natural resources, which will continue to be subject to Emirate-level taxation.
  • Dividends and capital gains earned by a UAE business from its qualifying shareholdings.
  • Qualifying intra-group transactions and reorganizations, provided all necessary conditions are met.
  • Individuals' earnings, salaries, and other employment income from both public and private sectors.
  • Interest and other income earned by individuals from bank deposits or savings schemes.
  • Foreign investors’ income from dividends, capital gains, interest, royalties, and other investment returns.
  • Individuals’ investment in real estate in their personal capacity.
  • Dividends, capital gains, or other income earned by individuals from owning shares or other securities in their personal capacity.
Taxable Income

Taxable Income

Navigating the complexities of taxable income and corporate taxation in the UAE is essential for businesses operating in the region. Our services offer expert guidance on UAE tax regulations, ensuring compliance and effective optimization of tax liabilities. With the expertise of SFTAX Accounting Services, you can manage your tax obligations, ensuring compliance while maximizing your tax efficiency. Partner with us for strategic tax planning and peace of mind.

Corporate Tax Rate

In January 2022, the UAE Ministry of Finance announced that Corporate Tax would be implemented at a standard rate of 9%. The tax structure is as follows:

  • 0% tax rate applies to taxable income up to AED 375,000.
  • 9% tax rate applies to taxable income exceeding AED 375,000.
  • For large multinational corporations meeting specific criteria, a separate tax rate (yet to be specified) will be applicable

Prepare your business for the new tax regime with the expertise of our Accounting Services. Our team will help you navigate the complexities of the Corporate Tax system, ensuring you understand your obligations and minimize your liabilities. Stay ahead of tax changes and optimize your tax strategy by partnering with our Accounting Services today.

UAE-Sourced Income

Under the UAE Corporate Tax (CT) law, income is classified as UAE-sourced income based on certain criteria. This includes:

  • Income from a non-resident person connected to or attributable to a Permanent Establishment (PE) in the UAE. For example, if a UK company has a UAE branch and an Italian supplier provides services to that branch, the supplier's income will be taxable in the UAE.
  • Income derived from activities, contracts, or assets located in the UAE. This encompasses services provided or utilized in the UAE, interest secured against UAE property, and insurance premiums related to UAE assets or residents.

Residents are taxed on their worldwide income, including UAE-sourced income, while non-residents are taxed only on their UAE-sourced income and income related to their UAE PE or nexus.

Enhance your understanding and optimize your tax strategy for UAE-sourced income with expert guidance from SFTAX Accounting Services. Our team will help you navigate the complexities of UAE Corporate Tax law, ensuring compliance and minimizing liabilities. Whether you're a resident or non-resident entity, partner with us to manage your UAE-sourced income effectively and stay ahead in the evolving tax system.

Corporate Tax for Free Zones

Corporate Tax for Free Zones

The UAE Corporate Tax Law introduces the concept of a "Qualifying Free Zone Person" (QFZP), which is defined as a free zone entity or branch that:

  • Maintains sufficient substance in the UAE
  • Earns eligible income (as specified by a Ministerial Decision)
  • Complies with transfer pricing regulations.
  • Meets any additional conditions set by a Ministerial Decision

A QFZP is subject to corporate tax but may benefit from a 0% tax rate on qualifying income. Alternatively, a QFZP can opt to pay the standard corporate tax rate. Explore the advantages of the Qualifying Free Zone Person (QFZP) status with our Accounting Services. Our experts will guide you through the nuances of UAE Corporate Tax Law, ensuring compliance and helping you maximize the 0% tax rate on qualifying income. Don’t miss out on potential savings—partner with us today!

Tax Losses and Implications

Corporate income tax is applied when a company’s revenue exceeds its expenses. However, businesses may incur losses, particularly in challenging times, such as during the recent pandemic. Despite these losses, companies must still cover their overhead expenses. The treatment of tax losses is critical for fairness and financial planning, with various countries imposing limits on loss carryforwards. Tax losses can be valuable in acquisitions but are subject to specific rules to prevent misuse. Companies can use tax losses to offset past and future income, offering potential financial benefits.

Navigate the complexities of tax losses with our expert services. Our team will assist you in managing the implications of corporate losses, helping you offset them against past and future income for financial advantages. Stay resilient and optimize your tax strategy—contact us today!

Key Considerations for Corporate Tax Calculation

When calculating corporate tax (CT) in the UAE, consider the following essential points:

  • Tax Rates: The UAE's CT rates differ by taxpayer type. Individuals and juridical persons face a 0% rate on taxable income up to AED 375,000 and a 9% rate on income exceeding AED 375,000. Qualifying Free Zone Persons enjoy a 0% rate on qualifying income and a 9% rate on non-qualifying income.
  • Applicability: The CT law applies to businesses with tax periods starting on or after June 1, 2023. It covers both resident and non-resident taxpayers. Residents include UAE-incorporated legal entities, natural persons conducting business in the UAE, and foreign entities effectively managed and controlled in the UAE. Non-residents are those with a UAE permanent establishment, state-sourced income, or a UAE connection.
  • Scope of Taxation: UAE residents are taxed on worldwide income, while non-residents are taxed on UAE-related income or state-sourced income not linked to a permanent establishment. Certain entities, such as UAE government bodies, specific government-owned companies, businesses in natural resource extraction, and qualifying investment funds, are exempt.
  • Free Zone Companies: Companies and branches in free zones are subject to CT. Qualifying free zone persons benefit from a 0% rate on qualifying income but face a 9% rate on non-qualifying income. To qualify, they must maintain adequate substance in the UAE, earn qualifying income, and comply with transfer pricing rules.
  • Taxable Income Calculation: Adjust accounting net profit or loss from standalone financial statements. Include exempt income, such as dividends and capital gains, and account for non-deductible expenditures, like fines and penalties. Losses can be carried forward to offset future income, with certain restrictions and regrouping relief provisions available.
  • Transfer Pricing: Comply with transfer pricing rules for transactions between related parties and connected persons based on the OECD Transfer Pricing Guidelines. Maintain detailed documentation, including local and master files. The General Anti-Abuse Rules (GAAR) may apply to transactions lacking genuine commercial purpose.

Maximize your understanding of corporate tax calculations with Sarah Ferguson Accounting Services. Our experts provide comprehensive guidance on navigating UAE tax regulations, ensuring compliance and optimizing your tax strategy. Contact us today for expert assistance!

Sarah Ferguson - Top Corporate Tax Consultant in Dubai

Sarah Ferguson - Top Corporate Tax Consultant in Dubai

For comprehensive tax services in Dubai, Sarah Ferguson Tax Consultancy stands out with a team of experts in international tax standards. Our deep understanding of tax laws across various industries allows us to deliver tailored tax solutions that align with both local and international regulations. We leverage our expertise to guide clients in planning and implementing tax strategies systematically, ensuring full compliance with all relevant tax rules. If you’re searching for top-tier corporate tax consultants in the UAE, we offer exceptional services designed to meet your business needs.

Why Choose Sarah Ferguson Tax Consultancy For Corporate Tax?

  • Expertise in UAE and International Tax Laws: Our team is highly knowledgeable in both UAE and international tax regulations, providing insights that align with Federal Tax Authority (FTA) requirements.
  • Accredited Tax Management: Our certified tax managers deliver optimal tax strategies, addressing all tax-related challenges with precision and clarity.
  • In-Depth Tax Reporting: Our tax professionals provide detailed reports, highlighting the impact of taxes on business transactions and offering actionable insights.
  • Accurate and Compliant Returns: We ensure that corporate tax returns are meticulously prepared and reviewed by accredited auditors, minimizing the risk of penalties.

Connect with us for top-notch corporate tax services in the UAE. Our consultants are ready to support your business with world-class tax solutions.

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Frequently Asked Questions

Globally, corporate tax rates vary significantly. As of recent data, some of the highest corporate tax rates are found in countries like the United Arab Emirates, Brazil, and France. However, tax rates are subject to change, and it is advisable to consult with a tax professional for the most current information.

Corporate tax is a form of direct tax levied on the net income or profit of corporations and other businesses. In the UAE, corporate tax is being introduced to ensure that businesses contribute to the nation's economy. It is calculated based on the profit earned by the company after deducting allowable expenses.

Corporate tax is a direct tax imposed on the net income or profits of a business, while Value Added Tax (VAT) is an indirect tax levied on the sale of goods and services. VAT is charged at each stage of the supply chain and is ultimately borne by the end consumer, whereas corporate tax is paid by the business based on its earnings.

Yes, free zone companies are generally required to register for corporate tax in the UAE. However, those that meet specific criteria, such as maintaining adequate substance and deriving income from eligible activities, may continue to benefit from the tax incentives offered by their respective free zones.

All businesses that earn taxable income above a certain threshold must register for corporate tax. This includes both onshore and free zone companies. It is essential to consult with a tax advisor to understand the registration requirements and compliance obligations specific to your business.

Individual investors in UAE real estate who do not conduct business activities may not be subject to corporate tax. However, if real estate activities are carried out as part of a business or on a commercial scale, corporate tax may apply. Specific cases should be reviewed by a tax professional for accurate assessment.

Yes, certain entities are exempt from UAE Corporate Tax, including government entities, government-controlled entities, extractive businesses (subject to existing Emirate-level corporate taxation), and non-extractive natural resource businesses. Additionally, qualifying public benefit organizations may also be exempt.

Foreign businesses operating in the UAE may be subject to corporate tax if they have a permanent establishment in the UAE or derive income from sources within the UAE. The tax implications for foreign businesses depend on the nature and scope of their activities in the UAE.

Small businesses may benefit from a small business relief, which provides certain exemptions and reduced tax rates under specified thresholds. This relief aims to support the growth of small enterprises. It is advisable for small businesses to consult with a tax advisor to determine their specific tax obligations.

Corporate tax will apply to most businesses operating in the UAE, including both onshore companies and free zone entities that do not meet exemption criteria. This includes companies in various sectors, such as manufacturing, trading, services, and others, that generate taxable income above the specified threshold.

Entities involved in oil and gas activities are typically subject to corporate taxation at the Emirate level under existing tax agreements. These businesses will continue to be taxed under the existing framework, separate from the new federal corporate tax regime being introduced in the UAE.

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