Are You Prepared For UAE Corporate Tax Law?
The UAE Corporate Tax Law was unavoidable as the country prepared to transition away from an oil-dominated economy.
In comparison to the global average company tax rate of 23.5 %, the proposed new standard rate of corporate tax (CT) in the UAE is one of the lowest in the world at 9%. Nonetheless, the implementation of the UAE’s first federal corporate income tax scheme signals a substantial shift for UAE-based enterprises.
Corporate taxation is governed by Tax Decrees issued by the governments of the seven Emirates. While CT is payable at a progressive rate under these Decrees, only foreign upstream oil and gas businesses and branches of foreign banks have paid the corporation tax, while enterprises operating in more than 40 countries have not.
Key provisions of the UAE Corporate Tax Law
The CT Law provides for the following statutory tax rates: Taxable Income Rate of Tax.
Taxable income not exceeding the amount specified in a Cabinet Decision*
Qualifying Income of a Qualifying Free Zone Person 0%
Taxable income exceeding the amount specified in a Cabinet Decision.
Non-Qualifying Income of a Qualifying Free Zone Person 9%
As per the Ministry’s announcement on 31st January 2022 and the Public consultation document that preceded the CT Law, the threshold for the Corporate Tax of AED 375,000 was established. This threshold has also been mentioned in the Corporate Tax FAQs published by FTA. We anticipate that this threshold will be confirmed in the relevant Cabinet Decision. However, it is not yet clear what would be considered as ‘Qualifying Income’. Further clarifications are expected in the following Cabinet Decision. For more details, please refer to our comments under the ‘Free Zone’ section.
Moreover, the CT Law offers relief to small businesses. If a small business meets the revenue threshold and other requirements set out in a subsequent Cabinet Decision, it may elect to be treated as not having derived Taxable Income for a Tax Period. The Corporate Tax Rate is also specified in the CT Law.
SS&Co guides you through the pre and post-implementation assessment of UAE corporate tax, with its impact on the business for both the long and short term, ensuring complete compliance with the corporate tax.
UAE Corporate Tax Law: Next Steps
How ready you are from a transfer pricing perspective?
Do you have visibility of all intercompany transactions?
Are your all intercompany transactions carried out on an arm’s length basis?
Also, does the transaction profile optimize your overall tax position?
Performing a transfer pricing impact assessment will help you understand your transfer pricing position to be ready and compliant.
New tax laws don’t just mean new tax costs for businesses they also mean new organizational and operational demands!
Corporate Tax Advisory in UAE
SS&Co. guides you through the pre and post-implementation assessment of corporate tax, corporate tax registration, with its impact on the business for both the long and short term, ensuring complete compliance with the corporate tax.
SS&Co. assist businesses in complying with new tax regulations by estimating their tax burden, optimizing their tax structure, upgrading their accounting systems, and training their employees on the new tax legislation. These services may also include continuous assistance to ensure ongoing compliance and to address any concerns that may occur during the tax filing and reporting process.
Our professional team assists you in fully comprehending corporate tax; its short and long-term effects on the firm based on the nature of the industry.
Our team is certified in public accounting and has extensive experience with VAT, auditing, accounting, and excise tax. Through impact analysis consultation services, Corporate Tax professionals assist your firm in complying with UAE Corporate Tax laws and regulations.
The time is to act now and we are here to get you for UAE Corporate Tax Law!