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Corporate Tax FAQs
The purpose of this page is to offer assistance regarding the UAE Corporate Tax (CT) regime. You can access the Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses (Corporate Tax Law).
The information provided in these questions and answers should not be construed as legal or tax advice, and it should not be assumed that the guidance is exhaustive or provides a conclusive answer for all situations. These questions and answers do not encompass all aspects of the UAE Corporate Tax (CT) regime, and individual or business decisions should take into account specific taxpayer circumstances.
A.Corporate Tax
The CT is a type of direct tax enforced on the net come or profit of corporations and other businesses. In some other jurisdictions, CT is also known as “Corporate Income Tax” or “Businesses Profits Tax”.
A competitive CT system built on international best practices is anticipated to strengthen the UAE’s position as a top global hub for business and investment and propel the UAE’s advancement and transition to acquire its mission objectives.
The majority of the countries in the world have an extensive CT regime, containing most of the countries in the Middle East.
From the financial year starting on or after June 2023, the UAE CT regime will become effective.
For instance
A company will be subject to UAE CT from 1 July 2023 for businesses that have a financial year starting on 1 July 2023 and ending on 30 June 2024. ( which is the start of the first financial year that begins on or after 1 June 2023)
A company will be subject to UAE CT from 1 January 2024 for businesses that have a financial year starting on 1 January 2023 and ending on 31 December 2023 (which is the start of the first financial year that begins on or after 1 June 2023)
Corporate entities formed in the UAE and legal entities effectively managed and controlled in the UAE as well as foreign business entities that have a permanent establishment ( see “ Foreign persons ”) in the UAE, are subject to UAE CT.
Only those who conduct businesses or other activities in the UAE, whether directly or through an unincorporated partnership or sole proprietorship. In due order, a cabinet decision will be released with more details on what would fall under the authority of UAE CT and what would not.
Yes, the UAE CT does not make a distinction based on nationality or place of residency. Legal entities that have a permanent establishment in the UAE are incorporated there, or both will be subject to UAE CT. This is true regardless of where the individual founders or owners of the organisation are located and what country they are from.
Yes, since the UAE CT is a federal tax, it will be imposed on all Emirates.
Businesses that are involved in the extraction of natural resources in the UAE and certain non-extractive activities that fall under Emirate-level taxation will not fall under the domain of UAE CT, provided they fulfil specific requirements.
On the other hand, other businesses may be liable for both CT and Emirate-level taxation. Any taxes paid at the Emirate level cannot be used as credits or deductions to reduce the amount of CT payable.
No, the VAT and the CT are two distinct tax kinds. Both will still be applicable in the UAE.
VAT and CT must be paid separately if your firm is registered for VAT. You may still be required to pay CT even if your company is not registered for VAT.
B. Scope and rate
According to the definitions of “Business” and “Business Activity” in the Corporate Tax Law, it is determined whether a person is a taxable person when their actions result in a UAE CT obligation.
Any ongoing or transient economic activity is referred to as a “business” and can be carried out by anyone. It is implied that a business is operated with the goal of making a profit and that the activity is organised and follows some sort of system. A business or commercial activity, however, does not lose its identity for UAE CT purposes just because it is not profitable.
All activities and assets used or held will typically be regarded as activities and assets used or held for the purposes of a “Business” for the purposes of applying the Corporate Tax Law to businesses and other juridical persons.
People can make money by working for wages and salaries, making investments, or engaging in commercial, industrial, or professional activities directly or as the sole proprietor of a business. A Cabinet Decision detailing additional information on what would put a natural person under the scope of UAE CT will be released in due course for natural persons.
The following people are automatically exempt from UAE CT or may apply for this exemption:
- The Federal and Emirate governments of the UAE, as well as those governments’ agencies, commissions, and other governmental entities;
- Firms that are wholly owned by the government, named in a cabinet decision, and that carry out a prescribed activity;
- Businesses involved in the extraction of natural resources in the UAE and related non-extractive activities that, after fulfilling specific requirements, are subject to taxation at the Emirate level;
- Entities that provide public benefits and are listed in a cabinet decision;
- Investment funds that comply with the requirements;
- Social Security or public or private pension plans that satisfy specified requirements; and
- UAE legal entities that satisfy certain requirements and are fully owned and controlled by exempt entities
