The UAE Ministry of Finance (‘MoF’), on 31st January 2022, announced the introduction of Corporate Tax (‘CT’), which will be effective for financial years starting on or after 1st June 2023.
The FAQs published on the websites of the MoFand the FTA provide advanced details. The relevant legislation (law and/or regulations) is yet to be published.
Highlights
- Being a federal tax, CT will apply to all UAE businesses and commercial activities, except for the extraction of natural resources, which will remain subject to Emirate level corporate taxation.
- UAE CT will not apply on an individual’s salary and other employment income; nor will it be applicable on capital gains, dividends, interest income etc received by an individual in their personal capacity (not requiring a commercial license or permit in the UAE).
- Foreign entities and individuals will be subject to UAE CT only if they conduct business in the UAE in an ongoing or regular manner.
- Only one COPTAX return will need to be filed per financial period.
FREE ZONE ESTABLISHMENTS
- Free zone businesses will be subject to CT and will be required to register and file returns. However, the CT incentives currently being offered to free zone businesses will be honoured as long as they comply with all regulatory requirements and do not conduct business with mainland UAE.
CORPORATE TAX: BASE AND RATE
UAE CT shall be applicable on taxable income (accounting net profit after certain adjustments). The rates are:
- 0% for taxable income up to AED 375,000
- 9% for taxable income above AED 375,000
- Different tax rate for large multinationals (having consolidated global revenue exceeding Euro 750 million ~ AED 3.15 billion) that meet specified OECD criteria.
Group Taxation
- A UAE group of companies will be allowed to form a tax group and be treated as a single taxable person, subject to conditions.
- A UAE tax group will only be required to file a single tax return for the entire group.
Set off Losses
Subject to conditions,
- Businesses will be allowed to use losses incurred to offset taxable income in subsequent financial periods.
- Losses from one group company may be used to offset taxable income of another group company.
Transfer Pricing
UAE businesses will be required to comply with transfer pricing rules and documentation requirements as set out in the OECD Transfer Pricing Guidelines.
Role of “AGX”
- Guidance and planning the requirements for thepre-implementation period of the CT
- Suggestions and support for remodeling the organizational requirements
- Review and compliance support after implementation of the CT.
To know more about the UAE CORPRATE TAX or to provide you assistance in tax or other compliance requirements, please contact us.