UAE’s new corporate tax rate of 9% for taxable business profits exceeding AED375,000 ($102,000) is set to come into effect for financial years starting 1 June 2023.
Companies with a taxable income below AED375,000 will not pay the tax.
Some corporate entities are exempt, including:
- Government entities.
- Government controlled entities.
- People engaged in an extractive business.
- People engaged in a non-extractive natural resource business.
- Qualifying public benefit entity.
- Qualifying investment fund.
- Public pension or social security fund that is subject to regulatory oversight of the competent state authority.
- Private pension or social security fund that is subject to regulatory oversight of the competent state authority.
- Any other Person as may be determined in a decision issued by the Cabinet at the suggestion of the Minister.
Those liable to the tax include:
- UAE companies and other juridical persons that are incorporated or effectively managed and controlled in the UAE;
- Individuals who conduct a business or business activity in the UAE as specified in a Cabinet Decision to be issued in due course; and
- Non-resident juridical persons (foreign legal entities) that have a Permanent Establishment in the UAE.
- Juridical persons established in a UAE Free Zone are also within the scope of Corporate Tax as ‘Taxable Persons’ and will need to comply with the requirements set out in the Corporate Tax Law. However, a Free Zone Person that meets the conditions to be considered a Qualifying Free Zone Person can benefit from a Corporate Tax rate of 0% on their Qualifying Income.
- Non-resident persons that do not have a Permanent Establishment in the UAE or that earn UAE sourced income that is not related to their Permanent Establishment may be subject to Withholding Tax (at the rate of 0%).
To determine the taxable income of a tax group, the parent company must prepare consolidated financial accounts covering each subsidiary. Transactions between the parent company and each group member and transactions between the group members would be eliminated for the purposes of calculating taxable income.
Under the new rules, the payment and compliance deadline allows taxpayers up to 21 months from the start of their financial year to prepare for filing and making their tax payments.
The deadline means, for example, that businesses with a financial year starting on June 1, 2023 and ending on May 31, 2024 will have the period starting from June 1, 2024 to February 28, 2025 to file their corporate tax returns and make their payments.
For a business where its first tax period starts on January 1, 2024 and ends on December 31, 2024, the return and payment would need to be made between January 1 and September 30, 2025.
Emirates cut some business fees
The UAE’s Ministry of Industry and Advanced Technology (MoIAT) has reduced some fees for 14 main and sub services and waived the fee for one service.
The move, which came into effect on 1 January 2023, is in line with the objectives of the ‘Make in the Emirates’ initiative to create an attractive business environment for local and international investors and support entrepreneurship and SMEs in the industrial sector by reducing the cost of doing business in the UAE (see https://moiat.gov.ae/en/).
MoIAT has waived the fee for selling UAE standards that previously costed AED481 ($131), in order to raise awareness of the importance of national standards and their role in supporting both the industrial sector and economic development.
MoIAT said that in line with the announcement of 2023 as the Year of Sustainability, the service fee reduction will encourage sustainable industries by promoting the deployment of advanced technology in order to lowers emissions.
Omar Al Suwaidi, Under-Secretary of the MoIAT, said, “The reduction and cancellation of some fees is in line with the ministry’s keenness to develop priority industrial sectors in the country and enhance its investment appeal, in line with the ‘We the UAE 2031’ vision that represents a national plan that offers promising opportunities for global partners.
“We also seek to further strengthen the UAE’s position as a global partner and an attractive and influential economic centre, as we enhance the competitiveness of industrial companies and their products without affecting the efficiency of their operations, as well as the certificates they issue.”