Top UAE Corporate Tax FAQs Every Business Owner Must Know

The UAE was known around the world to be a no-tax region until the introduction of Value Added Tax ( VAT) in 2018. The tax regime in the UAE is about to witness one of the biggest milestones in many years when the country introduces Corporate Tax in 2023. The introduction of Corporate Tax reaffirms the UAE’s commitment to meeting international standards for tax transparency and preventing harmful tax practices.

A competitive tax regime based on global best practices is likely to cement the UAE’s position as a leading hub for business and investment. However, businesses need to prepare to embrace the new regulatory change. Tax consultants in Dubai can help business owners to be prepared ahead for the introduction of the new tax. As part of this, we have prepared a list of Frequently Asked Questions (FAQ) on the UAE Corporate Tax. Read ahead to gain further insights on the UAE Corporate Tax:

1. What is Corporate Tax (CT)

Corporate Tax in the UAE can be defined as a type of direct tax levied on the net income or profits of corporations and other businesses. In other jurisdictions, it is also referred to as

“Corporate Income Tax” or “Business Profits Tax”.

2. When will the UAE CT regime become effective? 

The UAE Corporate Tax will be effective for financial years commencing on or after 1st June 2023.

3. Who will be subject to UAE Corporate Tax? 

The Corporate will apply to all the UAE businesses and commercial activities except for those businesses engaged in the extraction of natural resources. This is because they are subject to Emirate level corporate taxation and they will continue to be within its scope.

4. What will the UAE Corporate Tax rates be? 

The UAE Corporate Tax will be 0% for taxable income up to AED 375,000 and 9% for taxable income above AED 375,000. Seek advice from tax consultants in Dubai to accurately assess corporate tax rates.

5. Will an individual’s salary income be subject to UAE Corporate Tax? 

An individual’s salary and income from other employment whether received from the public or private sector will not be subject to the UAE Corporate Tax.

6. Will an individual who has a commercial license to carry out business in the UAE be subject to UAE Corporate Tax? 

The UAE Corporate Tax will be applied to Business income earned under a commercial license. Tax Consultants in the UAE can provide further information on this.

7. Will a free zone business be subject to UAE Corporate Tax? 

Companies operating in the free zones will be subject to UAE Corporate Tax. However, the government will continue to honour the corporate tax incentives given to free zone businesses that meet the regulatory requirements and do not conduct business with the mainland.

8. Should a free zone business register and file a Corporate Tax return? 

Yes. Companies operating in the free zone must register and file corporate tax returns in the UAE. Consult with tax consultants in Dubai for more information on corporate tax return filing.

9. Will the businesses in financial free zones be treated differently under the Corporate Tax regime? 

No. The UAE Corporate Tax treatment will be the same across all the free zones.

10. Will the banking sector be subject to the UAE CT regime? 

Yes. Banks will be within the scope of Corporate Tax in the UAE.

11. Will Corporate Tax Affect the UAE Real Estate Sector? 

Yes. The real estate sector falls within the scope of Corporate Tax in the UAE. Activities that are subject to the Corporate Tax regime include real estate management, construction, development, agency and brokerage activities.

12. Will a foreign company or individual be subject to Corporate Tax? 

Corporate Tax will apply to foreign businesses and individuals only if they carry out a trade or business in an ongoing or regular manner.

13. How will Corporate Tax Affect the Income of Foreign Investors? 

Corporate Tax in the UAE will generally not be imposed on a foreign investor’s income from dividends, capital gains, interest, royalties and other investment returns.

14. Can I form a tax group for the UAE Corporate Tax? 

Yes. A group of companies in the UAE is allowed to create a tax group. Such a group will be treated as a single taxable person if all the relevant conditions are met. A tax group is required to file a single corporate tax return in the UAE.

Consult with the Best Tax Consultants in Dubai, UAE 

The UAE Corporate Tax represents the beginning of a new era for the business entities operating in the country. The corporate tax is yet to become effective but businesses can prepare by keeping track of updates issued by the Ministry of Finance (MoF) and the Federal Tax Authority (FTA). Seeking advice from the best tax consultants in Dubai such as Jitendra Chartered Accountants (JCA) is the best way to stay prepared. JCA is one of the leading tax agents in the UAE approved by the FTA. Consult with our experts to ensure corporate tax compliance in the UAE.