TAX
Corporate Tax Services in Dubai
Grow your business with MAATS corporate TAX services in UAE
Corporate tax services in Dubai - Guide
On 31st January 2022, the Ministry of Finance of the UAE announced the introduction of Federal Corporate Tax services in Dubai which will be effective for the financial years starting on or after 1 June 2023. Businesses engaged in the extraction of natural resources will remain subject to Emirate level corporate taxation. The UAE CT regime will be based on international best practices, with minimal compliance burden on businesses.
SCOPE OF TAX
Corporate tax services in Dubai will apply to all businesses in the UAE carrying out commercial activities under a trade license in the UAE.
Corporate tax services in UAE will tax the worldwide profits of the UAE resident businesses, and the UAE-sourced profits of the non-residents.
EFFECTIVE DATE
Corporate tax services in Dubai will apply to the financial periods starting on or after 1 June 2023.
As most businesses has a calendar financial year (1 January – 31 December), the majority of UAE businesses would become subject to Corporate tax services in UAE from 1 January 2024 onwards.
TAX RATE
- 0% on taxable income between AED 0 – AED 375,000
- 9% on taxable income above AED 375,000
- A different tax rate for large multinationals that meet specific criteria set with reference to ‘PillarTwo’ of the OECD Base Erosion and Profit Shifting project.
CT RETURN
The Corporate tax services in Dubai return will need to be filed electronically once every financial year.
UAE Group companies can form a tax group and file a single tax return for the entire group. No provisional or advance Corporate tax services in UAE filings will be required.
TAXABLE INCOME
The taxable income will be the accounting net profit/income of a business, after making adjustments for certain items to be specified under the Corporate tax services in Dubai law. The accounting net profit/ income of a business is the amount reported in the financial statements prepared in accordance with internationally acceptable accounting standards. Losses can be carried forward to offset taxable income in subsequent financial periods.
EXEMPTIONS
Dividends and capital gains earned by a UAE business from its qualifying shareholdings will be exempt from Corporate tax services in UAE. A qualifying shareholding refers to an ownership interest in a UAE or foreign company that meets certain conditions to be specified in the Corporate tax services in UAE law.
In line with the UAE’s double taxation treaties, we would expect that UAE profits of foreign branches will be exempt or be allowed for a tax credit for tax paid in the foreign branch country.
TAXATION OF INDIVIDUALS
Corporate tax services in Dubai will not apply on an individual’s salary and other employment income (whether received from the public or private sector).
Individuals will not be subject to Corporate tax services in UAE on dividends, capital gains and other income earned from owning shares or other securities in their personal capacity. Interest and other income earned by an individual from bank deposits or saving schemes will not be subject to UAE CT.
The investment in real estate by individuals in their personal capacity should not be subject to Corporate tax services in Dubai provided the individual is not required to obtain a commercial license or permit to carry out such activity in the UAE.
Business income earned under a commercial license will be within the scope of Corporate tax services in UAE.
FREE ZONES
Corporate tax services in UAE regime will continue to honour the Corporate Tax incentives currently being offered to Free Zone businesses. Free Zone businesses will be able to continue to benefit from the current Free Zone CT holidays (0% taxation regimes) provided they comply with all regulatory requirements and don not conduct business with mainland UAE.
Free Zone Entities will be required to register for CT and file a CT return.
TAXATION OF NON RESIDENTS
Foreign entities and individuals will be subject to Corporate tax services in UAE only if they conduct a trade or business in the UAE in an ongoing or regular manner.
TAX GROUPS
A UAE group of companies can elect to form a tax group and be treated as a single taxable person, provided certain conditions are met.
A UAE tax group will only be required to file a single tax return for the entire group and tax losses from one group company may be used to offset taxable income of another group company, provided certain conditions are met.
Qualifying intra-group transactions and reorganizations will not be subject to Corporate tax services in UAE provided the necessary conditions are met.
TRANSFER PRICING
Transfer pricing rules seek to ensure that transactions between related parties are carried out on arm’s length terms (i.e. as if the transaction was carried out between independent parties).
UAE businesses will need to comply with transfer pricing rules and documentation requirements set with reference to the OECD Transfer Pricing Guidelines.
WITHHOLDING TAX
Withholding tax will not be applicable on domestic and cross-border payments of any nature under the UAE Corporate Tax regime.
KEY TAKEAWAYS
The introduction of Corporate tax services in Dubai will have an impact on the tax & compliance of most UAE businesses. Businesses should evaluate the tax implications and the impact of the introduction of CT and prepare for any required changes to their finance,tax policies, corporate structure and legal agreements.
HOW CAN WE HELP?
Our tax specialists will help you determine whether or not corporate income tax applies to your business. We can help you to introduce and implement any necessary changes to make this tax compliance process as smooth as possible.
