Hiring the best corporate tax consultants in Dubai for tax advisory services has become the need of the hour as businesses need to be prepared for the newly announced tax by June 1st 2023. Even though the UAE Corporate Tax Law is yet to be finalised, the Ministry of Finance (MoF) has issued relevant guidelines and a consultation document to help the businesses to start their preparations. Understanding the gravity of the situation, leading chartered accountants firms in Dubai such as Jitendra Chartered Accountants (JCA) start offering corporate tax services. JCA offers robust advisory on assessing the compliance requirements of the businesses.
By signing up with the top corporate tax consultants in the UAE, companies in the mainland and Freezone, can get assessed whether or not they fall within the scope of the tax, prepare the relevant documents and financial records, and how free zone companies will be taxed, understand the applicable tax rates, and know about exempted income, carry forward of losses, treatment of related party (group companies) and connected person transactions, withholding tax, allowable expenses, the cap on the interest, foreign tax credit, tax group formation, and other key requirements including tax payments, tax return filing and audit of financial statements. Getting to know the corporate tax requirements in the UAE will help businesses to ensure compliance and avoid relevant penalties and consequences. Complying with corporate tax in the UAE would also help companies to avoid significant penalties and maintain their reputation, trust and transparency amongst their investors and shareholders.
The Applicable Rate of Corporate Tax in the UAE
The rate of corporate tax in the UAE is one of the most competitive tax rates in the Middle East. Availing of corporate tax advisory services in Dubai will help entrepreneurs to understand the rate of corporate tax applicable to their business model. The UAE corporate tax will be levied on the annual taxable income of businesses in the following manner:
- 0%, for taxable income not exceeding AED 375,000
- 9%, for taxable income exceeding AED 375,000
Who falls in the UAE Corporate Tax Bracket?
Both Natural Persons and Legal Persons will fall within the scope of corporate tax in the UAE. Natural persons who will be subject to the corporate tax regime include sole establishments or proprietorships and individual partners in an unincorporated partnership who carry out business or commercial activity in the UAE. However, there will not be a parallel tax on the income of natural persons or individuals.
Legal Persons include the UAE companies and other types of legal persons incorporated in the UAE. Foreign Legal Persons having a permanent establishment in the UAE or earning income in the UAE will also fall within the scope of corporate tax. Legal Persons who are subject to the UAE corporate tax regime include Limited Liability Companies (LLC), Private Shareholding Companies (PSC), Public Joint Stock Companies(PJSC), and entities established under the laws of UAE laws that have separate legal personalities. Businesses can seek the advice of corporate tax consultants in Dubai to assess the applicability of corporate tax on their profits.
What Kind of Entities are Exempted from Corporate Tax?
Businesses can consult with corporate tax consultants in the UAE to verify whether they are exempted from the scope of the corporate tax regime. The following persons are the exempted from the UAE corporate tax regime:
- The UAE Federal Government and Governments of the Emirates, their departments, authorities and public institutions
- UAE companies wholly owned by the Government that conduct a sovereign or mandated activity and that are listed in a Cabinet Decision
- Companies engaged in the extraction and exploitation of UAE natural resources that come within the scope of Emirate-level taxes
- Charities and public benefit organisations listed in a Cabinet Decision
- Public & regulated private social security and retirement pension funds
- Investment funds subject to certain conditions
Applicability of Corporate Tax on UAE Free Zones Companies
Free zone persons, which means the companies and their branches registered in a UAE free zone, will fall within the scope of corporate tax. Such free zone businesses will be required to meet corporate tax filing requirements in the UAE. However, a free zone business can continue to receive tax incentives if it complies with all the regulatory requirements. Free zone companies can avail of corporate tax services in Dubai to check if they can receive tax incentives.
Meanwhile, the following conditions are also applicable in terms of corporate tax on UAE free zone businesses:
A free zone person can enjoy a 0% corporate tax rate on income earned from transactions with businesses located outside of the UAE
- Free zone businesses can benefit from a 0% corporate tax rate on income earned from trading with businesses out of the UAE and businesses operating in the same or any other free zone
- If a free zone business has a mainland branch, a 9% corporate tax rate will apply to its income sourced from the mainland. However, its other income will continue to be subject to a 0% corporate tax rate
- It is common for a free zone person without a mainland branch to earn income from its business with the UAE mainland. In such cases, it can continue to benefit from the 0% CT rate the mainland-sourced income is classified as ‘passive’ income’ such as interest, royalties, dividends and capital gains from owning shares in a mainland company
- Income earned from the business transactions between Free Zone Persons and their group companies located in mainland UAE will be subject to 0% corporate tax. However, payments made by the mainland group company to the free zone person will not be deemed as a deductible expense
- A free zone person operating in a UAE VAT Designated Zone is entitled to a 0% corporate tax rate on income earned from the sale of goods to UAE mainland businesses that are the importer of record of those goods
- A free zone person earning any other mainland sourced income will be disqualified for the 0% corporate tax benefit in respect of all their income
- If a Free Zone Person benefits from the 0% corporate tax regime in respect of mainland sourced income, such income will be within the scope of withholding tax at a 0% rate
What Entities Are ‘Residents’ as per the UAE Corporate Tax Law?
A legal entity incorporated in the UAE will be considered a resident as per corporate tax law in the UAE. Foreign companies will be treated as residents under the UAE corporate tax law if it is effectively managed and controlled in the UAE. A company will be considered effectively managed and controlled in the UAE if its decision-makers or directors make the key management and commercial decisions in the UAE. Talk to our corporate tax advisors in Dubai to determine the residence/non-residence status.
Non-residents will be subject to corporate tax in the UAE on,
- Taxable income earned from their Permanent Establishment in the UAE; and
- Income sourced in the UAE
Calculation of Taxable Income
Taxable income under the UAE corporate tax law will be calculated by using the accounting net profit (or loss) position in the financial statements. IFRS standards will form the basis of corporate tax assessment. However, the UAE corporate tax law will permit the businesses to use alternative financial reporting standards to determine the taxable income, which is expected to accommodate and reduce the compliance costs for taxpayers such as start-ups and SMEs. It is advisable to hire the best corporate tax advisors in the UAE to determine the taxable income accurately.
Exempted Income under Corporate Tax in the UAE
The following types of income are exempted from the UAE corporate tax regime. However, it is recommended to consult with corporate tax consultants in Dubai before making any tax-related decisions:
- A UAE corporate shareholder will be exempt from CT on dividends received, and capital gains earned from the sale of shares of a subsidiary company
- All domestic dividends earned from UAE companies, including dividends paid by a Free Zone Person that benefits from the 0% CT regime
- Dividends paid by foreign companies and capital gains from the sale of shares in both UAE and foreign companies will be exempted if certain conditions are met
- UAE companies are allowed to claim a foreign tax credit for taxes paid in the foreign branch country or elect to claim an exemption for their foreign branch profits
Formation of Tax Groups
A UAE resident group of companies can form a corporate tax group. It will be treated as a single taxable person provided the parent company holds at least 95% of the share capital and voting rights of its subsidiaries. However, neither the parent company nor any of its subsidiaries should be an exempt person or a Free Zone Person that benefits from the 0% CT rate. Furthermore, all the members of the group should use the same financial year. Corporate tax advisors in Dubai can help companies to form a tax group.
Corporate Tax Registration & Deregistration
Businesses that are subject to the tax will be required to apply for corporate tax registration in the UAE with the Federal Tax Authority (FTA). They should also obtain a Tax Registration Number within a prescribed period. Businesses that cease to be subject to the corporate tax must apply for corporate tax deregistration in the UAE. The application should be filed within three months from the date of cessation or liquidation. Corporate tax consultants in Dubai can assist businesses with tax registration and deregistration.
Corporate Tax Return Filing, Payment & Refund
A business is required to prepare and file only one UAE corporate tax return and other related supporting schedules with the FTA for each tax period. Businesses will not be required to file a provisional Corporate Tax return in the UAE and make advance corporate tax payments. Consult with corporate tax advisors in Dubai to know further about the administrative requirements. Furthermore, businesses need to adhere to the following conditions:
- Businesses must submit the tax return along with supporting documents to the FTA within (9) nine months of the end of the relevant Tax Period
- Payments to settle the corporate tax liability for a tax period must be made within (9) nine months of the end of the relevant Tax Period
- A taxpayer can apply for a tax refund request to the FTA if it can demonstrate that a corporate tax refund may be due
CT Filing and Deadlines
The table below illustrates the CT filing deadlines for businesses with financial year ends of 31 March, 30 June and 31 December:
|Financial year-end 30 June|
|First Tax Period 1 July 2023 – 30 June 2024|
|Financial year-end 31 December|
|1 January 2024 – 31 December 2024|
|Financial year-end 31 MARCH|
|1 April 2024 – 31 March 2025|
Corporate Tax Services We Offer
The introduction of corporate tax in the UAE will likely transform the country’s regulatory landscape, which means companies must be fully prepared to comply with the new form of taxation. Corporate tax consultants in Dubai such as Jitendra Chartered Accountants (JCA) can help the companies to prepare for corporate tax by offering tax assessment and tax advisory services. JCA has a team of highly qualified Chartered Accountants and tax agents in the UAE who can help the companies to ensure tax compliance. We have successfully assisted thousands of companies in complying with Value Added Tax (VAT) and Excise Tax and our impeccable track record will come in handy for businesses to meet the requirements related to corporate tax in the UAE. Specifically, JCA offers the following corporate tax services in Dubai, UAE:
Corporate Tax Assessment and Advisory Services
- Assessing and advising on tax implications for the company
- Assessing the eligibility of corporate tax and advising on corporate tax exemptions to the mainland, offshore as well as free zone businesses, if any
- Assessing and analyzing the possibility of tax grouping of the companies to avail tax benefits
- Advising on the restructuring of group companies including foreign subsidiaries/branches
- Advising on the possibility of foreign tax credits, withholding tax and deduction of expenses and interest
Corporate Tax Compliance Services
- Registration of businesses for Corporate Tax (applying for Tax Registration Number) with the Federal Tax Authority
- Determining and Computing the corporate taxable income applicable to different corporate structures
- Preparation and filing of the Tax returns
- Deregistration of Tax Registration Number
Corporate Tax Agent Services
- Preparation of filing of tax documents for the submission to the Federal Tax Authority
- Representing, replying and filing an appeal against the notice issued by the authorities
- Represent the businesses to appeal against any penalties or notices issued by the Federal tax authority