We have an experienced team of accountants and tax advisors who will help you easily complete your corporate tax registration and tax submission on time.
With the UAE’s new corporate tax law, many companies find themselves navigating unfamiliar laws and processes. Our team of tax experts can help you understand how corporate tax applies to your business, take advantage of tax exemptions and reliefs, and make sure you meet the compliance deadlines on time to avoid penalties.
From registering your business for corporate tax, complying with the accounting standards, and filing your corporate tax submission, our team is ready to guide you through each step for a smooth, efficient, and cost-effective process.
Every business in the UAE must do these three things to comply with the new corporate tax scheme:
1. Register for corporate tax from June 2023 onwards.
2. Keep accounting records up to the required reporting standard (e.g. IFRS).
3. File a corporate tax submission with the Federal Tax Authority.
While not all businesses have to pay corporate tax, every business must still register and comply with these steps to verify whether they qualify for a tax exemption.
Our experts will advise you on all corporate tax considerations which might impact your business. This will include what tax exemptions could be available to your business and how to benefit from these.
Our team will assist in registering your business for corporate tax with the FTA and manage the deadlines for all of your corporate tax obligations.
Our team will assess your corporate tax position, ensure the best tax outcome for your business, and file all necessary submissions with the FTA throughout the year.
Corporate tax is levied on the taxable income (net profit) of business establishments resident in the United Arab Emirates. The new taxation policies came into effect on June 1, 2023, with most companies being fully taxable by January 1, 2024.
Entrepreneurs and investors globally have always considered the UAE as one of the most lucrative places to set up a new business.
Both large companies and startups have favoured the UAE due to the country’s exceptionally stable political environment, strategic location, fabulous business infrastructures and, most importantly, what was the 0% corporate tax regime.
According to the International Monetary Fund (IMF), the UAE has the fifth-largest economy in the Middle East. The country has historically depended on its revenue from oil and natural resources but has been gradually becoming less dependent on oil in recent years.
When the UAE government first announced the introduction of corporate tax, many businesses incorrectly viewed it as being similar to Value Added Tax (VAT). However, corporate tax and VAT are very different.
The main difference is that corporate tax is mandatory for every company in the UAE, whereas VAT only applies to companies once they reach certain thresholds.
VAT is a consumption tax levied on the sale of goods and services. The customer pays it at the time of purchase. On the other hand, corporate tax is levied on businesses’ taxable income.
Companies will have to pay corporate tax on their annual net profits. Businesses collect VAT from customers when selling a product or service and then remit it to the government.
Corporate tax will be paid directly to the government and calculated by considering the net income of the company, not the total revenue or sales volume.
So, now that we know what corporate tax is in the UAE, let’s find out further details about the taxation process.
The general rule is that every company in the UAE will be subject to corporate tax, including free zone companies. There are a few, very specific exemptions which are outlined further below.
More specifically, According to the UAE Ministry of Finance (MOF), the below individuals/corporations will be liable to pay Corporate Tax in the UAE:
All of these business entities operating within the UAE are subjected to the new tax regime from June 1, 2023, and onwards. The tax calculation of the period of businesses will differ based on how they report their financial year, as follows:
Apart from a few specific exceptions, all commercial activities that take place within the UAE will have to register and file the corporate tax.
MOF, the regulatory body for the UAE corporate tax, has devised a taxation policy with three taxation tiers, which are:
In order to register for Corporate Tax in the UAE, you can access the Federal Tax Authority’s (FTA) website. On this platform, you must fill out the required forms and submit the necessary documents.
The documents that will need to be provided will include the entity’s Emirates ID, trade license, passport, financial records, details of business activities and corporate structure. Once the forms and documents have been submitted, the authorities will review the application and, if approved, provide the company with a tax registration number (TRN), signifying their official registration.
Approvals usually arrive within 20 days, however, if additional information is required, it will take another 20 days. At Virtuzone, we will assist you with your application through the FTA.
The MOF has also announced a few exemptions for certain entities. If your business or institutional venture falls under one of those exemptions, you won’t have to file a tax report or pay taxes. The exempt entities are:
In addition to the above-listed exemptions, MOF has also announced that companies may qualify for tax income exemptions in the following cases:
To qualify for deductions from earnings from dividend payments, the UAE company must own at least a 5% share of the subsidiary company operating abroad. The ownership requirement also varies for a few countries.
For instance, in the case of the UK, the UAE shareholder entity must own at least 10% of the UK company’s ordinary share for ten consecutive months to be eligible for a tax-deductible earning.
Freezone Persons—entities established in a UAE Free Zone—can qualify for a zero percent tax rate on specific conditions.
To be a Qualifying Free Zone Person (QFZP) and avail the 0% CT rate, an entity must:
Qualifying Income includes:
Qualifying Income does not include income derived from performing any of the ‘Excluded Activities’ that are also specified in the above mentioned Ministerial Decision
Notably, a QFZP’s non-qualifying income must not exceed the de minimis threshold of five percent of total revenue or AED 5 million, whichever is lower.
Free Zone Persons are encouraged to review their operations in light of these updated regulations to ensure compliance and understand their eligibility as a QFZP under the CT Law.
Where a person is operating a business under their own person – so there is no separate legal entity such as a company – they will fall under the corporate tax regime once their annual revenue reaches AED1m.
The UAE and Dubai are attractive destinations for many freelancers, thanks to the easy taxation and the availability of many affordable and flexible coworking spaces.
However, to practise as an independent professional or freelancer in the UAE, you will need a professional licence as a freelancer
Two or more taxable entities, upon meeting specific criteria (outlined below), can request to establish a ‘Tax Group’ and be viewed as a singular entity for Corporate Tax considerations.
For the establishment of a Tax Group, the parent firm and its branches must:
Furthermore, for a Tax Group formation, the primary enterprise must:
Such ownership, voting rights, and entitlements can be secured either directly or indirectly via branch entities. However, a Tax Group must not consist of an Exempt Entity or a Qualifying Free Zone Entity.
For calculating the taxable earnings of a Tax Group, the leading company should compile combined financial statements for every subsidiary within that Tax Group for the appropriate tax duration. Operations between the primary company and its subsidiaries, as well as between the subsidiaries themselves, would be disregarded when computing the Tax Group’s taxable earnings.
Typically, costs associated with generating taxable revenue can be deducted. Although there are specific limitations and exclusions outlined in the Corporate Tax Regulations, the timing of deductions can differ based on the nature of the expense and the accounting approach used.
For assets that have long-term value, the expenditure is often accounted for through either depreciation or amortisation over the asset’s useful lifespan. If a cost serves both personal and business functions, it must be divided appropriately.
Only the business-related segment of the expenditure is considered to be solely for the benefit of the entity’s taxable operations. The business expenses that will be deducted are:
In addition to the above-listed exemptions, MOF has also announced that companies may qualify for tax income exemptions in the following cases:
To qualify for deductions from earnings from dividend payments, the UAE company must own at least a 5% share of the subsidiary company operating abroad. The ownership requirement also varies for a few countries.
For instance, in the case of the UK, the UAE shareholder entity must own at least 10% of the UK company’s ordinary share for ten consecutive months to be eligible for a tax-deductible earning.
The UAE government will also allow the foreign company branches located in the UAE to choose one of the following options:
The UAE Ministry of Finance (MOF) has authorised the Federal Tax Authority (FTA) to administer the taxation process and act as a regulatory compliance body. Businesses will have to file their corporate tax once every year, along with their financial report.
Most medium and large businesses in the UAE usually follow the International Financial Reporting Standards or IFRS. The FTA, however, accepts several other ways to keep the tax filing process simple for businesses and professionals.
As discussed above, the Federal Corporate Tax Authority requires all companies to register with them for tax filing purposes. After completing a financial year, businesses will get nine months to complete their tax filing and financial reporting.
Outlined below are sample timelines for registration, submission, and payment due dates for entities with a Tax Period (Financial Year) that concludes on either the 31st of May or the 31st of December.
The introduction of corporate tax will help the UAE economy become more diversified and sustainable in the long term. It will also make the country more attractive to foreign investors.
It should be noted that the UAE is not the first country in the Middle East and Gulf region to introduce corporate tax. Several countries have it already with the following rates:
Now, let’s take a look at the corporate tax rates of some other economic regions.
The UAE’s tax rate of 9% is still lower than many of the competing regional and global economies.
To keep your UAE business compliant with tax policy changes, it’s essential to stay updated with the latest announcements from the UAE government. You can also seek professional help from our tax advisors to ensure your business is structured in the most efficient way to handle the corporate tax payable.
Virtuzone has a team of vetted professionals who can help your business register with all relevant tax authorities and ease your business management. Get in touch
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