Recently, the UAE government issued the Federal Decree-Law No. 47 of 2022 on the Taxation of Enterprises and Firms (hereafter known as the "Corporate Tax Law"). For financial years beginning on or after 1 June 2023, the Corporate Tax Law serves as the legal foundation for the adoption and execution of a Federal Corporate Tax ("Corporate Tax") in the UAE. To assist UAE in achieving its economic goals and hasten its growth and transition, the corporate tax was introduced. Along with the UAE's wide web of double taxation agreements, the assurance of a viable corporation tax structure that complies with international norms would solidify the UAE's stance as a top commercial and industrial destination. The Corporate Income Tax UAE framework draws from the finest standards internationally and encompasses concepts that are widely recognized and valued due to the UAE's status as a hub for worldwide commerce and finance. This guarantees that the Corporate Tax in UAE will be transparent in its ramifications and easy to understand. Now, let's take a deeper look at the entities that are exempted from it according to the most recent updates;
Who is exempt from corporate tax in UAE?
- The determinant to exemptions is based on the UAE Corporate Tax law, and this concept has been slightly broadened from that in the Consultation Document to now have certain non-extractive natural resource enterprises.
- Further, the Corporate Tax ordinance has added more definitions for government agencies and state-run companies. In particular, the Corporate Tax regulation has stated that without undertaking any industry or commercial operation under a License granted by a Licensing Authority, Government entities will be treated as exempted individuals.
- The corporation tax law has made it clear that for companies in resource extraction if an entity is making money through both resource extraction and non-extractive ventures, the extractive revenue is to be levied by the applicable Emirate Laws and the other profits are to be levied by the Corporation Tax law.
- Natural extractive industries operations are not liable to corporation tax in the nation, yet they are nevertheless taxed at the emirate scale. Entities like governmental bodies, retirement funds, investment grants, and nonprofits can also stand to gain from exemptions.
- The established free zone enterprises will be qualified to take advantage of a 0% UAE Corporate Tax rate on relevant income in appreciation of the crucial role that free trade zones play in advancing the country's industrial development.
- The Corporate Taxation Law's provisions state that wages and other private earnings from occupation, whether it comes from labour in the public, semi-public, or private sectors, are exempt from corporate taxation.
- Corporate Tax is not applied to interest or other personal earnings from bank deposits or savings plans, nor is it applied to investments in real estate made by persons acting in their capacities.
- To retain tax impartiality for its stakeholders, investment funds are frequently established as controlled collaborations rather than corporate entities. The Corporate Taxation regime strives to treat UAE and foreign investment funds set as unincorporated partnerships as economically accessible, putting investors in a similar tax situation to one they would be in if they had engaged straight in the core assets of the fund.
- Via the Federal Tax Authority(FTA), they are qualified to apply for exemption from the corporation tax system. For investment assets that meet their requirements, the FTA will allow tax exemption.
To apply for corporate tax registration, you can get help from a corporate tax advisor in the UAE. It is better to register on time by keeping in view the business’s financial year.
How does the issuance of the corporate tax in the UAE is going to affect your business?
All organizations in the UAE (including free zone firms, private enterprises, and persons conducting business in the UAE) and international companies with a foothold in the UAE are impacted by the release of the corporate taxation Law in the UAE, which constitutes a fundamental shift to the UAE tax environment. To be competitive and maintain tax efficiency, all firms need to comprehend the Corporate Tax requirements and weigh their ramifications.
Now, it has become crucial for all businesses to immediately avail corporate tax advisory services in their respective zones to assure compliance as per officially published corporate tax law. You can go for the best Corporate tax advisors to get expert opinions and the latest updates.
Seek the Trusted Services of Top Tax Consultants in the UAE Today!
Corporate Tax UAE is a trusted interface that cultivates the best solutions for any tax-related intricacies, we have an onboard expert team that is determined to meet the client’s specified needs. To stay compliant with the Federal Tax Authority’s regulations and standards, do not hesitate to get in touch with us at Corporate Tax UAE!
Abrar Ahmad holds a Master’s as well as an MPhil in Finance and has an extensive experience of 10+ years in managing all aspects of Taxation, VAT Consulting and Accounting. He also carries with him a working knowledge of corporate tax and has helped drive value and growth to the businesses of numerous clients.