The most advanced infrastructure and the world-class amenities the UAE offers is the prime factor to support the economic growth as well as the reason for its leading position among the Arab nations. A supporting commercial and legal environment in the UAE makes it the best place for businesses and investments. The tax regime in the UAE is about to welcome the greatest milestone as the country introduces corporate tax in 2023.

UAE-based businesses will be obliged to evaluate the impact of the new tax regulations on their functioning and comply with them. As part of helping the business entities to be prepared for the introduction of the new tax, we have curated here some Frequently Asked Questions and their answers on the corporate tax In UAE.

• What is the UAE corporate tax?

Corporate tax is a form of direct tax levied on the net income or profit of corporations and other business entities.

• When will the UAE corporate tax come into effect?

As per the declaration of the UAE Ministry of Finance, corporate tax will come into effect from the financial year starting on or after 1 June 2023.

• What will be the rates of UAE corporate tax?

The tax rate will be 0% for the taxable income up to AED 375,000 and 9% for the taxable income above AED 375,000.

• What type of businesses come under the scope of the UAE corporate tax?

The UAE corporate tax will apply to all the business and commercial activities in the UAE except for the extraction of natural resources, which will remain to be subjected to the Emirate level corporate taxation.

• Which is the responsible authority for the administration and collection of corporate tax in UAE?

The Federal Tax Authority will be in authority for the enforcement, administration and collection of the UAE corporate tax. The Ministry of Finance will be the ‘competent authority’ for international agreements and the exchange of information associated with corporate tax.

• Will a salaried individual be subject to the UAE corporate tax?

The salary or income acquired through government or private employment will not make one subject to the UAE corporate tax.

• Will a foreign company be subject to the UAE corporate tax?

Any foreign businesses and individuals who conduct a trade or business in an ongoing or regular manner will be subject to the UAE corporate tax.

• How the corporate tax will affect the real estate and banking sector in UAE?

Banks and real estate come within the scope of corporate tax in the UAE. The other activities which fall under the UAE corporate tax regime include construction, management, development, agency and brokerage.

• Will the UAE corporate tax be levied upon the income of foreign investors?

The income of foreign investors received from dividends, capital gains, interest, royalties and other investment returns will not be subject to corporate tax in the UAE.

• Is forming a tax group for the corporate tax permitted in the UAE?

A group of companies in the UAE can create a tax group which will be considered as a single taxable person. It will be based on certain conditions and if they are all met, these tax groups can enjoy the benefit of being treated as a single taxable person who is expected to file only a single corporate tax return.

• Will the Free zone business entities come under the scope of the UAE corporate tax?

The free zone businesses will also be subject to the corporate tax but the government will continue to honour the tax incentives given to the free zone businesses which meet all the requirements and do not conduct business with the UAE mainland.

• Will the large multinationals in the Freezone be subject to the UAE corporate tax?

The businesses in the free zone will not be subject to the UAE corporate tax but those free zone business entities which are a part of the large multinational companies may be subject to the Global Minimum Tax of 15% under Pillar Two.

• Will the UAE holding companies be exempted from the corporate tax?

Though holding companies will come within the scope of corporate tax, certain income streams of holding companies may be exempt from the corporate tax. Further clarification on the requirements for a qualifying shareholding is to be announced by the state.

• Will investment returns of individuals be subjected to corporate tax?

Individuals will not be subject to corporate tax on dividends, capital gains, shares or securities in their personal capacity.

• Why corporate tax is being introduced in the UAE?

The introduction of UAE corporate tax is based on the internationally accepted tax systems which will help the UAE government to remain in the position of the best place to start businesses. The new tax regime will aid the growth of the nation and realize its strategic commercial and industrial goals.

Our team of experts at MAATS can assist businesses to be prepared for the upcoming changes in business operations and accounting due to the implementation of corporate tax. We help with complete corporate tax consultancy services, tax filing, tax refunding, tax deregistration etc.