UAE Corporate Tax Update – Cabinet Decision on Annual Taxable Income
February 13, 2023
As per Article 3 of the Federal Decree Law No 47 on “Taxation of Corporations and Businesses”, which marks the commencement of corporate tax regime in UAE for financial years beginning on or after 1st June 2023, the threshold of annual taxable income chargeable to corporate income tax at the rate of 0% for Taxable Person was to be specified separately by a Cabinet Decision.
The Cabinet vide its Decision No. 116 of 2022 has announced the threshold as AED 375,000/- (Three hundred seventy -five thousand dirhams). Given this, the corporate tax rate of 0% and 9% will be applicable progressively as under:
- 0% on the annual taxable income upto AED 375,000; and
- 9% on the annual taxable income exceeding AED 375,000.
The aforesaid threshold is applicable to a Taxable Person (both natural and juridical person) irrespective of the number of Business or Business Activity it carries out in a tax period. It is also clarified that artificially splitting of a Business or Business Activity across the taxable persons entire business or business activity to take the benefit of the threshold of 375,000 dirhams on standalone basis could be considered as an arrangement to obtain Corporate Tax advantage under the General Anti Abuse provisions of the Decree Law. Federal Tax Authority shall be permitted to examine such arrangement and while doing so it may consider all relevant facts and circumstances including financial, economic and organizational links.