A Complete Guide to the Latest Corporate Tax UAE

Subsequent to the issuance of the latest Corporate Tax Federal Decree Law No. 47 of 2022 in the UAE, taxable corporations are compelled to register for tax and to meet all requisite regulations and standards set by the UAE Federal Tax Authority. Top Tax Agents in the UAE can seamlessly and effectively guide corporations to enforce full compliance with the set statute, and to adequately file for tax. This article seeks to address all probable frequently asked questions in relation to the latest Corporate Tax Law in the UAE. 

What is the Corporate Tax UAE?

The Corporate Tax UAE is a standard tax that is imposed upon the net income or net profit of a taxable corporation or business. Nevertheless, in distinct jurisdictions, corporate tax is cited as corporate income tax or business profit tax.

What is the sole purpose of Corporate Taxes introduction in the UAE?

The Corporate Tax reaffirms the UAE’s standing as a prominent global nerve centre for the business stakes, moreover, it expedites the nation’s advancement to attain its core policy. The introduction of the Corporate Tax regime pushes forward the UAE’s engagement to achieving global standards for tax precision and averting adverse tax etiquette.

Is the corporate tax a distinct feature in other global jurisdictions?

Globally, numerous states and nations have all-inclusive Corporate Tax regimes. Notable members of the Gulf Cooperation Council are no exception.

Is the corporate tax enforceable to businesses in all of the UAE Emirates? 

The scope or enforceability of the UAE Corporate Tax extends to all of the UAE Emirates; it is a deemed Federal Tax.

What is the primary objective of the Federal Tax Authority under the corporate tax regime? 

The UAE Federal Tax Authority primarily serves an administration, collection, and regulation enforcement objective under the UAE Corporate Tax Regime.

Who are the persons deemed subject and exempt from the Corporate Tax UAE?

The UAE Corporate Tax applies to all UAE businesses and commercial activities that meet the set threshold, exempting the extraction of natural resources, which is presumed to remain subject to the Emirate level corporate taxing.

How is the Net Income Due (subject) to the corporate Tax UAE calculated? 

The taxable income is the net profit or net income that is generated from a relevant business activity, this refers to the amount reported in the financial statements, prepared in full compliance with the apex approved accounting standards.   

What is the corporate tax UAE rate?

The corporate tax rate is as follows:

  • A margin of 0% for taxable income up to AED 375,000. 
  • A percentage of 9% for taxable income above AED 375,000.

Is the scope of the corporate tax subject to a private person’s salaries/income?

The corporate tax UAE is not enforceable on private person’s salaries and alternative employment sources of income. 

Is income earned by a foreign investor subject to corporate tax UAE?

The Corporate Tax UAE is not applicable to foreign investors’ income from capital gains, interest, dividends and royalties. 

Read more: Will foreign companies be subject to the UAE corporate tax?

Does the scope of the corporate tax UAE encompass free zone businesses? 

Free zone businesses in the UAE are deemed subject to the Corporate Tax UAE. More still, incentives applicable for registered Free Zones will continue to be enforceable.  

Is the UAE banking sector subject to the corporate tax UAE regime?

The UAE banking sector’s operation is presumed subject to Corporate Tax in the UAE.

Under the UAE corporate tax regime, is the real estate sector subject?

UAE businesses which carry out real estate management, construction, development, agency and brokerage activities are subject to Corporate Tax UAE.

Can the prior year’s incurred losses be used to lower future taxable income in the UAE?

The UAE Corporate Tax Regime is set to grant businesses the to adopt losses incurred to lower taxable income in successive financial periods.

How does the UAE corporate tax regime define withholding tax?

Withholding tax is defined as a tax levy that is withheld from an employee’s paycheck by the payer. 

What is the rate of UAE withholding tax on domestic and cross-border payments?

Notably, the UAE withholding tax is not deemed enforceable on domestic and cross-border payments under the UAE Corporate Tax Regime.

Are transfer pricing regulations enforceable on businesses in the UAE?

Businesses in the UAE ought to be compliant with the transfer pricing regulations and compelled to meet the documentation requirements put in place with reference to the OECD transfer pricing guidelines.

How regularly are businesses in the UAE required to file a corporate tax return?

Only one Corporate Tax return is required to be filed per financial period. There is no arrangement for provisional or advanced Corporate Tax filing. 

Is it essential to file the corporate tax return electronically?

Essentially, the Corporate Tax return ought to be filed electronically. 

Is advance tax payment compelled on UAE businesses?  

It is not a set obligation for UAE businesses to issue corporate tax advance payments. 

The role of top tax agents in the UAE, Inline with the set measures for Non-Compliance  

Noncompliance with the UAE corporate tax statute sets a high risk of incurring penalties and fines for businesses. Thus, it is essentially advisable for businesses to avail of top tax services from reputable UAE tax consultants. Tax Consultants in the UAE can seamlessly and effectively guide taxable persons to conduct tax registrations and avert any probable penalties for noncompliance. So, contact us today and we shall be happy to assist you.