On January 31, 2022, the tax landscape in the UAE underwent fiscal transformation once more as the Ministry of Finance and FTA announced the implementation of a new federal corporate tax UAE with effect from fiscal year starting June 1, 2023. This move is crucial in solidifying the UAE’s status as a global business and financial hub and reducing reliance on oil and gas for long-term growth, aligning with the nation’s strategy. The UAE government aims to seek tax revenue that will create a safety net and promote a more stable economy. The UAE government had to seek all the reliable information from the unedited marks.
 

The United Arab Emirates achieved a major milestone by starting to enforce a new tax system on June 1, 2023. This historic milestone saw the implementation of corporate tax (CT) UAE on businesses, signaling a significant change in the country’s tax strategy.  

The introduction of corporate tax in UAE has ignited the businesses to understand its implications on their system. Corporate Tax Consultants in Dubai play a crucial role in ensuring compliance with Corporate Tax laws. In this blog, we will discuss everything you need to know about UAE Corporate Tax.
 

The Introduction of UAE Corporate Tax 

FTA introduced corporate tax in UAE in Federal Decree-Law No. 47 of 2022 which came into effect for financial year beginning on 1 June,2023. Companies which had their financial years ending on December 31 had their corporate tax period from 1 January 2024. Corporate Tax UAE was announced at a standard rate of 9% for incomes exceeding AED 375,000. Exemptions were provided to certain entities and small businesses whose revenue generation was under AED 3 million. 

Who needs to register for UAE corporate tax? 

In UAE, the taxable persons classified as residents or non-residents with nexus or permanent establishment are required to register and acquire a corporate tax registration number. 

Resident persons: 

As defined by FTA, Resident persons with respect to Corporate Tax UAE, are those entities that are incorporated in UAE, either offshore or in free zones or mainland. The foreign entities which are managed and controlled in the UAE and individuals conducting business in the UAE are also presumed to be the resident persons. Worldwide income of resident persons in UAE is taxable. 

There are deadlines by which resident taxpayers are required to register themselves. Some information is specified regarding deadlines as per FTA website as follows: 

Non-Resident Persons: 

In UAE Non-resident persons are the companies with permanent establishment and those generating UAE-sourced income which is not attributable to the permanent establishment or nexus in the UAE. Non-residents are taxed only on the incomes that are associated with the UAE permanent establishment or nexus. FTA has specified the deadlines as follows; 

Penalty in Case of Failure to Apply for Registration 

All taxable persons are required to submit their corporate tax registration application. Those who fail to do so within the deadlines have to pay a penalty of AED 10,000. 

Filing Corporate Tax UAE 

Companies are required to prepare the returns of corporate tax UAE within 9 months after the relevant tax period ends. Any corporate tax liability must be paid within this time period. Most companies in UAE use the calendar year as their financial year ending on 31st December. According to which the corporate tax return UAE is required to be filed till 30th September 2025 for tax year ending 31 December 2024. Tax Consultants in Dubai, UAE ensure that the businesses stay compliant and maintain all records and documentation for at least 7 years to facilitate the audits in future. 

Who is exempt from Corporate Tax UAE? 

FTA has specified certain exemptions for UAE Corporate Tax. This includes the government entities or entities controlled by the government. Other exempt persons for the purpose of Corporate Tax UAE include the following: 

• Extractive businesses in the UAE 

• Non-extractive natural resource businesses in the UAE 

• Qualifying public benefit entities 

• Qualifying investment funds 

• Pension or social security funds, both public and private 

• Wholly owned and controlled UAE subsidiaries of certain exempt entities 

Small businesses 

Businesses generating revenue below AED 3,000,000 for latest and all previous tax periods have the availability of small business relief. Small business relief will be available for tax periods that end before or on 31 December 2026. 

The eligibility criteria for small business relief are as follows: 

• Resident person in the UAE 

• Its revenue for the relevant tax period and previous tax periods must not exceed AED 3,000,000 

• It must not be a financial institution or a holding company 

A business who is able to meet the criteria for small business relief is exempt from paying corporate tax on its profits. It will further be subject to reduced compliance requirements, namely simplified transfer pricing rules. 

Qualifying Free Zone Persons 

If a taxable person in UAE meets the criteria of Qualifying Free Zone Person, a corporate tax of 0% is levied on their income. The eligibility criteria are as follows:  

1: Maintain adequate substance in the UAE 

2: Derive qualifying income 

3: Comply with the transfer pricing rules and documentation requirements 

4: Prepare audited financial statements in accordance with the International Financial Reporting Standards (IFRS). Have non-qualifying income that is not above the de-minimis threshold 

 Following excluded activities are subject to 9% corporate tax rate:  

• Transactions with natural persons not related to certain qualifying activities 

• Banking, insurance, and finance and leasing activities not included in the specified exemptions 

• Ownership or exploitation of non-commercial immovable property outside free zones,  

• Ancillary activities related to those mention before 

Conclusion: 

As the end of fiscal year 2024 is approaching, the taxable persons in UAE are required to seek expert services from Tax Consultants in Dubai, UAE to ensure compliance with corporate tax law UAE and avoid penalties.  

How SS&Co Can Help?

At SS&Co, we understand the importance of staying ahead of global and local tax trends. Our goal is to build enduring relationships by delivering exceptional value. In both prosperous times and during challenges, we are your trusted resource, offering in-depth knowledge, extensive experience, and innovative tax technology solutions to simplify compliance, enhance efficiency, and improve your tax cash flow.