UAE Corporate Tax Law
Table of Contents
The UAE Ministry of Finance recently introduced the Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses, which will have significant implications for businesses operating in the United Arab Emirates (UAE). This blog post aims to provide a comprehensive overview of the UAE Corporate Tax Law, its applicable rates, key matters for consideration, and the steps businesses should take to ensure compliance.
Applicability and Tax Rates
From 1 June 2023, businesses in the UAE will be subject to Corporate Tax, starting from the beginning of their first financial year.
The applicable tax rates differ based on the type of taxpayer.
Individuals and Juridical Persons:
- 0% for taxable income up to and including AED 375,000
- 9% for taxable income exceeding AED 375,000
Qualifying Free Zone Persons (QFZPs):
- 0% on qualifying income
- 9% on taxable income that does not meet the qualifying income definition
Small Business Relief
Businesses with an annual revenue of less than AED 3 million in the relevant and previous tax periods may be eligible for small business relief. This relief aims to provide tax benefits and support to smaller enterprises.
The important dates to consider for businesses in the UAE regarding the new Corporate Tax law are as follows:
Financial Year Ending 31 May:
- First Tax Period: 1 June 2023 to 31 May 2024
- Due date of filing first returns: 28 February 2025
Financial Year Ending 31 December:
- First Tax Period: 1 January 2024 to 31 December 2024
- Due date of filing first returns: 30 September 2025
Key Matters for Consideration :
To ensure compliance with the Corporate Tax Law, businesses in the UAE should carefully evaluate and address the following key matters:
- Exempt Person Status: Determine whether the business falls under the category of exempt persons as defined by the law.
- Non-Resident Taxable Person: Identify if the business qualifies as a non-resident taxable person and understand the associated tax implications.
- Qualifying Free Zone Persons: Determine if the business qualifies as a QFZP and meets the criteria for qualifying income.
- Exempt Income: Identify any income that is exempt from corporate taxation.
- Eligibility for Reliefs: Explore and assess any reliefs that the business may be eligible for under the Corporate Tax Law.
- Inadmissible and Non-Deductible Expenditure: Evaluate the impact of expenses that may be considered inadmissible or non-deductible for tax purposes.
- Related Party Transactions: Ensure that transactions with related parties adhere to Arms’ Length standards and maintain appropriate documentation.
- Tax Group Formation: Examine eligibility to constitute a tax group for potential tax advantages.
- General Anti-Abuse Rules (GAAR): Consider the implications of GAAR and ensure compliance with its provisions.
- Finance Team Readiness: Equip the finance team with the necessary knowledge and skills to ensure ongoing compliance with the Corporate Tax Law.
- Reporting and Software Adjustments: Make any necessary changes to reporting software and internal reports to accommodate tax reporting requirements.
Undertaking an Impact Assessment
Businesses are advised to conduct an impact assessment and perform a mock tax computation based on draft financial statements. This will help quantify potential tax expenses and address any complex transactions upfront. Seeking expert opinions and engaging in discussions early on can minimize compliance hurdles when filing the first tax return.
Contact Us for Assistance
This is all about UAE Corporate Tax Law.
If you have any queries or require assistance with understanding and navigating the UAE Corporate Tax Law, our business consulting solutions are here to help. Contact us at [ Phone: (+971) 50-221-3421 Or Email:info@adeptbizconsulting.com ] for expert guidance tailored to your specific needs. We are committed to supporting businesses in achieving compliance and maximizing their success in the evolving tax landscape.
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