Direct Tax
The UAE’s Ministry of Finance has introduced a Corporate Federal Tax (CIT) on business profits, effective from June 1st, 2023. This move aims to foster the UAE’s credibility as a global business hub and accelerate the pace of transformation across the country.
CORPORATE TAX SERVICES
The UAE’s Ministry of Finance has introduced a Corporate Federal Tax (CIT) on business profits, effective from June 1st, 2023. This move aims to foster the UAE’s credibility as a global business hub and accelerate the pace of transformation across the country.
Applicable Rates of Corporate Income Tax in UAE
The rates of Corporate Income Tax are as follows:
- 0% CIT for taxable income up to AED 375,000.
- 9% CIT for taxable income over AED 375,000.
A separate tax rate will apply to large companies that meet the specific criteria related to Pillar Two of the OECD Base Erosion & Profit-Sharing Project (with global revenue in excess of 750 million or AED 315 billion).
- Will Corporate Tax be Applicable to Free Zones?
Corporate Tax will apply to businesses in UAE’s free zones. However, free zone businesses that comply with the regulatory requirements and do not conduct business in mainland UAE will continue to enjoy corporate tax incentives. Free zone businesses must register themselves and file corporate returns.
- Will Corporate Income Tax Apply to Foreign Individuals & Entities?
The corporate tax applies to those foreign individuals & entities that conduct business in the UAE regularly. A foreign investor’s income derived from dividends, capital gains, interest, royalties, and other investment returns will not be subject to Corporate Tax Services in UAE.
Our Gamut of Corporate Tax Services in UAE Includes:
- Transfer Pricing
Compliance with the transfer pricing procedure has gained enormous significance among businesses since the introduction of Corporate Tax. Companies in the UAE must comply with the transfer pricing rules and documentation requirements.
- Business Tax
Managing taxes can be challenging when businesses conduct business across multiple jurisdictions. Our services are designed to meet the unique challenges of your jurisdiction while fulfilling your requirements.
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ECONOMIC SUBSTANCE REGULATION
The UAE Economic Substance Regulations, introduced in April 2019 and repealed by Cabinet Resolution No.57 of 2020 in August 2020, require UAE entities to maintain an adequate “economic presence” in the UAE relative to the activities they undertake.
Applicability
The regulations apply to all UAE onshore and free zone companies, as well as certain other business forms that undertake one or more “Relevant Activity” for financial years commencing on or after 1 January 2019.
Exempt Entities
Entities that meet the requirements to be treated as “exempt” do not need to demonstrate economic presence in the UAE. However, such entities are required to file a Notification and provide sufficient evidence to support their exempt status.
Purpose
The introduction of economic substance requirements brings the UAE in line with other jurisdictions that have recently issued economic substance legislation and affirms the UAE’s commitment to addressing concerns around the shifting of profits derived from certain mobile business activities to “no or nominal tax jurisdictions” without corresponding local economic activities.
Assessment
UAE entities will need to assess whether and which of their activities fall within the scope of the economic substance regulations, and how to ensure they meet the economic substance requirements in respect of each Relevant Activity. This is both a qualitative and quantitative assessment that would involve consideration of operational, financial, tax / transfer pricing, legal, and governance matters.
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