Corporate Tax In UAE

The Ministry of Finance has announced the introduction of a 9% federal corporate tax in the UAE on business profits with a threshold of AED 375,000. This comes into effect from the financial year beginning 1st June 2023.

The corporate tax rate in UAE is amongst the most competitive in the world and the lowest in the GCC – where Bahrain now becomes the only country without a CT regime.

For now, it has been made clear that the regime of corporate tax in UAE will follow best global practices and is expected to be implemented with easy corporate tax compliance requirements.

The corporate tax in UAE will be payable on the profits of UAE businesses as reported in their financial statements prepared in accordance with internationally accepted accounting standards. There will be minimal exceptions and adjustments. This clearly means that financial statements must now be without exception audited on time.

The extraction of natural resources, likely to remain subject to emirate-level corporate taxation (for example, a different corporate tax in Dubai from one in Abu Dhabi or any another emirate) is to be the only business activity with tax exception, the announcement says. Exemptions, subject to some conditions, will also apply to entities operating in Free Zones.

With this introduction with conditions, concerns about the global minimum 15% income tax are also likely to be addressed. No withholding taxes will be imposed, and with the Foreign Tax credit in the UAE, there will be no payment of additional taxes to the extent of credit allowed.

There is to be no corporate tax on capital gains and dividends which will continue to boost the holding company structure. The new tax regime allows group tax registrations or taxability at a group level. Hence, inter-company losses shall be allowed in computing taxable profits.
Transfer pricing and documentation requirements will apply to UAE businesses in reference to the OECD Transfer Pricing Guidelines.

Corporate Tax Implementation in the UAE

In the UAE’s rapidly evolving legal and compliance environment, this new UAE Corporate Tax ( Dubai/UAE CT) and its administrative corporate tax compliance framework will be widely discussed. The wider regional and global economy will watch the rollout closely and factor in the corporate tax rate in UAE into their calculations. While it merits reiterating that the UAE corporate tax rate would still be amongst the lowest anywhere, it is still a quantum leap from the old tax regime. Its introduction affects the entire gamut of business operations from prices, marketing, and accounting procedures to documentation and IT infrastructure.

Businesses with activities in the UAE ( from Offshore and Onshore) will need to consider the implications of Company Tax on their transactions including cross border transaction and entity structure and ensure compliance with the new Corporate Tax requirements.

Effective Corporate Tax planning rolled out early in the game will be crucial for all businesses operating in the UAE.

Make a Smooth and Seamless Transition to the New Era with MBG’s UAE CT Offerings

Most top businesses in the country have already begun their UAE CT readiness assessments.

Early preparation towards corporate tax compliance is critical to avoiding higher implementation costs as well as to reducing the pressure on internal teams to complete these preparations within a tight last-minute deadline.

At MBG Corporate Services, our expertise and experience will help you navigate this new landscape and ensure your organization makes a smooth and seamless transition to the Corporate Tax era.

Also Check

Frequently Asked Questions on Corporate Tax

Phase-wise approach to planning for Corporate Tax
Corporate tax in uae

Key advantages to working with MBG Corporate Services

  1. Team has extensive experience and expertise in handling tax transactions of fortune 500 conglomerates, domestic corporates comprising large, medium and small enterprises and family business offices;
  1. Team has advised several businesses in planning and structuring their transactions based on global tax practices, corporate tax doctrines and country’s local tax laws;
  1. Team possesses acumen and a proven track record in successfully completing client engagements in range of cross border transactions and is competent to advice on the whole range of international tax practices based on concepts of double taxation avoidance agreements, OECD framework (including Transfer Pricing Guidelines) and BEPS principles;
  1. Team has expertise in structuring of transactions for consortiums for turnkey projects and Engineering, procurement and construction contracts having obligations of “off-shore” and “on-shore” supplies and services of designing, engineering and drawings;
  1. Team has managed several transactions of business restructuring involving mergers, spin-offs and other corporate restructuring transactions and is well versed with tax implications arising in such arrangements;
  1. Team is well versed with managing compliances comprising of calculation of corporate taxes, deposits, filing’s, reporting’s, documentation and certification;
  1. Team has a long and rich experience in dispute resolution in handling representation before local Tax Appellate Authorities, Tribunals and Courts on complex tax matters and position;
  1. Team has long experience in representing viewpoint of trade and business by way of consultation and suggestions at the stage of designing new policy framework by tax authorities and government aiming ease of doing business and achieving tax certainty;
  1. Team is well positioned in obtaining clarifications, prior determination on complex transactions for achieving clarity and avoiding tax disputes in future;
  1. Our teams stay updated on new rules, policies, changing tax compliance/obligations and accounting requirements and supporting clients in meeting them timely and accurately.

What can we help you achieve?

Stay one step ahead in a rapidly changing world and build a sustainable future with us.

Get a quote

Explore more Direct Taxation services:

Withholding Tax (WHT) Advisory

Tax Residency Advisory

Foreign Tax Credit (FTC) Advisory

Transfer Pricing Advisory

Permanent Establishment (PE) Advisory

Advisory on Double Tax Avoidance

Tax Residency Certificate

Free Trade Agreement Analysis Services