19/06/2023
Corporate Tax is a form of direct tax levied on the net income of corporations and other businesses.
Corporate Tax is sometimes also referred to as “Corporate Income Tax” or “Business Profits Tax” in other jurisdictions. The UAE issued its federal corporate tax law that will levy a headline 9 per cent rate on taxable income exceeding Dh375,000 ($102,000).
Taxable profits below the threshold will be subject to a 0 per cent rate of corporate tax. No corporate tax will apply on salaries or other personal income from employment — be it in the government, semi-governmental, or private sector.
Businesses will become subject to the UAE corporate tax from the beginning of their first financial year that starts on or after June 1, 2023.
Who is subject to Corporate Tax?
Broadly, Corporate Tax applies to the following “Taxable Persons”:
●UAE companies and other juridical persons that are incorporated or effectively managed and controlled in the UAE;
●Natural persons (individuals) who conduct a Business or Business Activity in the UAE as specified in a Cabinet Decision to be issued in due course; and
●Non-resident juridical persons (foreign legal entities) that have a Permanent Establishment in the UAE (which is explained under Section 8 of the law).
Juridical persons established in a UAE Free Zone are also within the scope of Corporate Tax as “Taxable Persons” and will need to comply with the requirements set out in the Corporate Tax Law. However, a Free Zone Person that meets the conditions to be considered a Qualifying Free Zone Person can benefit from a Corporate Tax rate of 0% on their Qualifying Income (the conditions are included in Section 14 of the law).
Corporate taxation in the UAE is the 3rd lowest in the world, making it a comparatively favourable business hub!.
