Who will pay corporate tax in UAE?

UAE has implemented corporate tax with effect from 01-06-2023. The introduction of Corporate Tax is intended to help the UAE achieve its strategic objectives and accelerate its development and transformation.

Given the position of the UAE as an international business hub and global financial centre, the UAE Corporate Tax regime builds from best practices globally and incorporates principles that are internationally known and accepted.

Corporate Tax is a form of direct tax levied on the net income of corporations and other businesses.

Corporate Tax is sometimes also referred to as “Corporate Income Tax” or “Business Profits Tax” in other jurisdictions.

Broadly, Corporate Tax applies to the following “Taxable Persons”:

● UAE companies and other juridical persons that are incorporated or effectively managed and controlled in the UAE;

● Natural persons (individuals) who conduct a Business or Business Activity in the UAE as specified in a Cabinet Decision to be issued in due course; and

● Non-resident juridical persons (foreign legal entities) that have a Permanent Establishment in the UAE (which is explained under Section 8).

Juridical persons established in a UAE Free Zone are also within the scope of Corporate Tax as “Taxable Persons” and will need to comply with the requirements set out in the Corporate Tax Law.

However, a Free Zone Person that meets the conditions to be considered a Qualifying Free Zone Person can benefit from a Corporate Tax rate of 0% on their Qualifying Income (the conditions are included in Section 14).

Who should pay corporate tax in the UAE?

All the businesses whose taxable profit (net) is more than 375,000 AED fall under the purview of corporate tax and are required to pay 9% percentage of net profit as corporate tax. In order extent support to small businesses and start-ups, the corporate tax rate will be '0' % if the net profit is up to 3,75,000 AED

Written By CA Adarsh Janardhanan ACA

Expandx Tax Consultants