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Corporate

Corporate Tax in UAE

Corporate Tax in UAE

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ExpertCorporate Tax in UAE

Worried about the new corporate tax regulations in the UAE? Don’t sweat it! At Secure Track, our tax specialists are here to make the transition smooth. We’ll guide you through everything, from understanding what’s considered taxable income to calculating your exact corporate tax liability. We’ll keep you informed of any updates and help you optimize your tax strategy for maximum efficiency. 

Our dedicated team of tax professionals stays ahead of the curve, constantly monitoring legislative changes to provide proactive guidance and minimize risks. Let Secure Track handle your UAE corporate tax – so you can focus on running your business.

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TaxWhat Is Corporate Tax in UAE?

In the UAE, corporate tax is a new levy on the net profits of businesses operating there. It applies to most business and commercial activities, starting from June 2023. There are a few exceptions, including government entities and businesses in specific natural resources sectors.

Here’s a breakdown of the UAE corporate tax structure:

Tax-free threshold:

Businesses with taxable income up to 375,000 UAE dirhams (AED) are exempt from corporate tax.

Standard rate:

For taxable income exceeding AED 375,000, a 9% corporate tax rate applies.

Multinationals:

There's a possibility of a higher tax rate (yet to be specified) for large multinationals meeting specific criteria.

If you’re unsure about how this applies to your business, it’s always best to consult Secure Track’s tax professionals.

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UAEImportance Of Corporate Tax in UAE as Compare to Individual Tax

The UAE has opted for a corporate tax system instead of an individual income tax system, and there are some key advantages to this approach:

  • Reduced Burden on Individuals: Residents and expats in the UAE enjoy a tax-free salary. This attracts talent and fosters a consumer-driven economy.
  • Targeted Revenue Stream: Corporate tax focuses on business profits, allowing the government to regulate revenue generation without impacting individuals’ disposable income.
  • Administrative Efficiency: Implementing and monitoring corporate tax is generally considered less complex than managing a broad individual income tax system.
  • Business Competitiveness: The UAE maintains its appeal as a tax haven for individuals, potentially attracting more businesses and entrepreneurs.
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Importance Of Corporate Tax in UAE

ComparisonCorporate Tax: UAE vs Global Norms

Here’s a breakdown of how UAE’s corporate tax compares to other countries:

Tax Rate:
  • UAE: The UAE boasts a competitive rate of 9% on taxable income exceeding AED 375,000. This positions it as one of the lower corporate tax jurisdictions globally.
  • Global Average: The worldwide average corporate tax rate sits around 23.54%, significantly higher than the UAE’s rate.
Tax Threshold:
  • UAE: Businesses with taxable income below AED 375,000 are exempt from corporate tax, offering relief to smaller companies.
  • Other Countries: Tax thresholds vary. Some countries might have similar exemptions for small businesses, while others might not.
Taxation of Free Zones:
  • UAE: Businesses operating within designated free zones in the UAE are generally exempt from corporate tax, maintaining their attractiveness for specific industries.
  • Other Countries: Free zone benefits and tax structures differ across countries. Some might offer similar exemptions, while others might have different tax arrangements for free zones.
Focus on Attracting Businesses:
  • UAE: The UAE’s low tax rate and free zone benefits are clear signals of their intent to attract foreign direct investment and establish itself as a global business hub.
  • Other Countries: Some countries might prioritize higher tax revenue through corporate tax, while others might compete with the UAE by offering even lower rates or attractive incentives.

Overall, the UAE’s corporate tax regime positions itself favorably with a low rate, tax exemptions, and free zone benefits.

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ApplicabilityUnderstanding the Scope of Corporate Tax in the UAE

The UAE corporate tax applies to most business and commercial activities operating within the seven emirates, with a few key exceptions. Here’s a breakdown of applicability:

Who is Subject to UAE Corporate Tax?

  • Most Businesses: This includes companies, sole proprietorships, and any entity carrying on a commercial activity in the UAE.
  • Turnover Threshold: If a natural person (e.g., a freelancer) has an annual turnover exceeding AED 1 million from a UAE business activity, they’ll be subject to corporate tax.

Who is Exempt from UAE Corporate Tax?

  • Government and Related Entities: UAE government entities, government-controlled entities, and public benefit organizations are generally exempt.
  • Extractive Businesses: Businesses engaged in the extraction of natural resources within the UAE typically have separate tax arrangements and are not subject to corporate tax.
  • Qualifying Free Zone Persons: Businesses operating within designated free zones with a valid free zone license may be exempt from corporate tax on their core activities within the free zone. However, there are exceptions and it’s advisable to consult the specific free zone authority for details.
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Scope of Corporate Tax in UAE
Tax Period in UAE

Tax TimeWhat is Tax Period in UAE?

The tax period in the UAE for corporate tax purposes is the financial year (the Gregorian calendar year or the 12-month period for which your business prepares financial statements).

Here’s a more detailed explanation:

  • Default Option: By default, the tax period aligns with the Gregorian calendar year, running from January 1st to December 31st.
  • Alternative Option: However, your business can have a different financial year for internal purposes (e.g., July 1st to June 30th). In such cases, that 12-month period becomes your tax period for UAE corporate tax.
  • Changing Tax Period: There’s limited flexibility to officially change your tax period with the Federal Tax Authority (FTA), the governing body for UAE corporate tax. It’s generally allowed for:
    • Liquidation purposes: If your business is closing down.
    • Alignment purposes: To align your tax period with another entity you’re associated with for tax grouping, financial reporting, or claiming foreign tax relief.

Key Points to Remember:

  • Regardless of your chosen tax period, the corporate tax is imposed annually on your taxable income for that period.
  • You have nine months from the end of your tax period to file your UAE corporate tax return and settle any tax liability.
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Stay Ahead of Tax Obligations!

Don’t go it alone! Secure Track’s team of UAE tax specialists can help you ensure a smooth transition. Contact us today for a consultation!

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+971 52 589 1206

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FAQWe Answer your
Frequently Questions

Yes, the UAE introduced a corporate tax in June 2023. Most businesses pay a 9% tax on profits exceeding AED 375,000.

UAE corporate tax is 9% of your taxable income exceeding AED 375,000. This taxable income is your net profit after deducting all allowable expenses and exemptions.

Dubai uses the same 9% corporate tax as the rest of the UAE. This applies to profits over AED 375,000.

Yes, the UAE is known for being income tax-free for residents. They introduced a corporate tax in 2023, but it only applies to business profits, not individual salaries.

Dubai (part of UAE) isn’t entirely tax-free for businesses. It has a 9% corporate tax on profits exceeding AED 375,000.

Dubai, along with the UAE, focuses on attracting residents and businesses. Instead of income tax, they rely on revenue from sources like corporate tax, tourism, and oil (historically). This keeps individual income tax-free.

The UAE introduced corporate tax to diversify income beyond oil and generate funds for public services like infrastructure and healthcare, all while maintaining its appeal to businesses with a low 9% rate.

Yes, VAT and Corporate Tax are separate in the UAE. You might need to pay both. VAT applies to goods and services, while Corporate Tax is on business profits.

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