Everything your Business needs to know about the newly issued Corporate Tax in UAE

14 December 2022

Saranya Mohan

All businesses will be liable to pay Corporate Tax from June 2023

All Taxable Businesses must register for corporate tax and get a corporate tax registration number, including Free Zone Businesses. Some Exempt Businesses may also be asked to register for Corporate Tax by the Federal Tax Authority. Beginning with the fiscal year from June 1, 2023, businesses will be liable to Corporate Tax.

Who are the subjects of the Tax law?

The corporate tax law levies taxes based on source and residence. The classification of the Taxable Person determines the applicable basis of taxation. "Resident Business" must pay taxes on both their domestic and international income (i.e., on residence basis). Whereas, only income obtained from sources within the UAE will be subject to taxation for "Non-Resident Business" (i.e., on source basis).
Where a person lives or has their domicile does not matter when determining residence for corporate tax purposes. A person will not be a taxable person and thus not be liable for corporate tax if they do not meet the requirements to be either a resident or a non-resident as set out in the law.


What is the rate of Tax Levied?

Corporate Tax will be levied at a rate of 9% on Taxable Income exceeding AED 375,000. Taxable Income below this threshold will be subject to a 0% rate of Corporate Tax. Corporate Tax will be charged on Taxable Income as follows:

For Resident Taxable Business:

  •      Taxable Income not exceeding AED 375,000 (this amount is to be confirmed in a Cabinet Decision) - 0%
  •       Taxable Income exceeding AED 375,000 - 9%

For Free Zone Business:

  •         Qualifying Income - 0%
  •         Taxable Income that does not meet the Qualifying Income definition - 9%

Who are exempted?
1. Government entities and government-controlled entities that are listed in a cabinet decision are automatically exempt.

2. Exempt if the Ministry of Finance is notified (and provided certain requirements are met): Natural resource businesses that are both extractive and non-extractive.

3. If included in a Cabinet Decision: Entities that qualify as Public Benefit Entities

4. Subject to compliance with specific requirements, exempt if submitted to and accepted by the Federal Tax Authority: Public or private pension and social security funds, qualified investment funds, wholly-owned and controlled UAE subsidiaries of government entities, government-controlled entities, qualified investment funds, or public or private pension and social security funds.

5. Public or private pension and social security funds, Qualifying Investment Fund, Wholly-owned and controlled UAE subsidiaries of a Government Entity, a Government Controlled Entity, a Qualifying Investment Fund, or a public or private pension or social security fund.

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