UAE has Announced Implementation of Corporation Tax w.e.f 1st June 2023: Top 10 Facts

Due to the OECD’s adoption of a minimum tax rate of 15%, the UAE appears to have implemented Income Tax at the right time, albeit at a lower rate. What is the most important element of the UAE business tax regime:

1. Corporations and other businesses now have to pay a corporate tax on their net income or profit. Because this is a federal tax, it applies to all Emirates.

2. If taxable profits are up to AED 3,75,000, there is no tax (to help startups and MSMEs), and if taxable profits are over AED 375,000, there is a 9% tax rate.

3. It excludes businesses engaged in the extraction of natural resources, which are subject to corporate taxation at the emirate level.

4. Free zone enterprises will be liable to UAE corporate tax, but the current benefits for free zone businesses that meet all regulatory criteria and do not conduct business with the mainland UAE will be maintained.

5. The fiscal year will run from July 1 to June 30.

6. There will be no withholding tax or advance tax.

7. Business losses can be deducted from profits in succeeding fiscal years. In fact, they can be used to offset the profits of group firms if certain conditions are met.

8. For transfer pricing compliance, the OECD TP Guidelines would be used.

9. Salaried individuals, income from real estate and other investments, and any other non-business income are exempt from taxation (Dividend and Capital Gains).

10. It’s worth noting that the tax rate is lower than the worldwide minimum tax rate of 15%, which the UAE has committed to.