12 Dec Introduction of Corporate Tax in the UAE
The UAE (United Arab Emirates) will launch a federal corporate tax on business profits from June 1, 2023. The UAE Federal Tax Authority will be accountable for the new corporate tax regime’s supervision, collection, and enforcement.
Here are the applicable corporate tax brackets under the new system:
- Zero percent for taxable income up to AED 375,000
- Nine percent for taxable income above AED 375,000
- A minimum effective tax rate will apply under ‘Pillar Two’ of the OECD Base Erosion and Profit Shifting project” to multinational corporations that have consolidated global revenues of more than EUR 750m.
How does the new UAE corporate tax affect free zones?
Corporate tax incentives offered to free zone establishments that do not conduct business in mainland jurisdiction will remain in place. Please consult with your free zone to find out about the corporate tax incentive applicable to your specific jurisdiction.
Will an individual’s wage income be subject to the new corporate tax regime?
Corporate tax will not apply to an individual’s salary and other employment income. In addition, individuals will not be subject to corporate tax on dividends or capital gains from owning shares in a personal capacity. However, business income earned under a commercial business license will be within the scope of corporate tax.
Will anyone be exempt from the new corporate tax regime?
Businesses involved in extracting natural resources will continue to be subject to Emirate-level corporate taxation and beyond the remit of the new corporate tax regime.
Will the new corporate tax regime allow prior-year losses to reduce future taxable income?
The corporate tax regime will allow a company to use losses incurred to offset taxable revenue in subsequent financial periods. A tax loss would arise when the total deductions the company can claim are greater than the total income.
Will foreign corporate tax paid on UAE taxable income be recognized under the new corporate tax regime?
Foreign corporate tax paid on UAE taxable income will be allowed as a tax credit against UAE corporate tax liability.
Are there penalties for non-compliance under the new corporate tax regime?
Like other taxes and levies such as VAT, businesses will be subject to penalties for non-compliance with the new corporate tax regime. For details on fines and penalties, please consult the UAE Federal Tax Authority.
What actions should I take to ensure my business is ready?
We recommend you consult a Registered Tax Agent to understand the full impact of the new corporate tax regime and how to prepare your business best.
If you are interested in starting a new business, please speak to one of our consultants to discover the free zone jurisdictions with the best corporate tax incentives.
Use our Cost Calculator to get an estimate of how much business setup in Dubai cost.