About Corporate tax

In accordance with UAE Federal Law No. 47 of 2022 on taxation of corporations and businesses (the "Corporate Tax Law"), businesses will become subject to UAE Corporate Tax from the beginning of their first financial year after 1 June 2023.

As a result of this announcement, UAE will become the fourth GCC country to introduce a federal corporate tax.

UAE corporate tax to be implemented on 1st June '23

What is Corporate tax (CT)?

Corporate tax is a form of direct tax imposed on corporations and other business entities based on their net income or profit.

As a result of the introduction of the CT, the UAE hopes to

• cement its position as a leading global hub for business and investment
• accelerate its development and transformation to achieve its strategic objectives
• Ensure that it meets international standards for tax transparency and prevents harmful tax practices.

As a result, CT will apply to:

All businesses and individuals conducting business activities under a commercial licence in the UAE

free zone businesses (The UAE CT regime will continue to honour the CT incentives currently being offered to free zone businesses that comply with all regulatory requirements and that do not conduct business set up in the UAE’s mainland.)

Foreign entities and individuals only if they conduct a trade or business in the UAE in an ongoing or regular manner

Banking operations

Businesses engaged in real estate management, construction, development, agency and brokerage activities.

Listed below are the exemption rules for corporations.

• Businesses engaged in the extraction of natural resources are exempt from CT as these businesses will remain subject to the current Emirate level corporate taxation.
• Dividends and capital gains earned by a UAE business from its qualifying shareholdings will be exempt from CT.
• Qualifying intra-group transactions and reorganizations will not be subject to CT, provided the necessary conditions are met.

CT will also not apply to:

• An individual earnings salary and other employment income, whether received from the public or the private sector
• Interest and other income earned by an individual from bank deposits or saving schemes
• A foreign investor’s income earned from dividends, capital gains, interest, royalties and other investment returns
• Investment in real estate by individuals in their personal capacity
• Dividends, capital gains and other income earned by individuals from owning shares or other securities in their personal capacity.

CT Rate As per Ministry of Finance, CT rates are:

• 0 per cent for taxable income up to AED 375,000
• 9 per cent for taxable income above AED 375,000 and
• a different tax rate (not yet specified) for large multinationals that meet specific criteria set with reference to 'Pillar two' of the OECD Base Erosion and Profit Shifting Project.