Introduction

The UAE had brought forward a corporate tax regime on June 1, 2023. This new tax regime applies to almost all businesses operating in the UAE.

The corporate tax rate in the UAE is 9%. However, exemptions apply to various categories of individuals and entities. Below you’ll find a list of groups that qualify for such exemptions:

• Small businesses with annual profits of less than AED 375,000
• Businesses operating in certain free zones
• Public benefit organizations
• Natural resource extraction companies
• Investment funds
• Holding companies

Key Features of the UAE Corporate Tax Regime

Key Features of the UAE Corporate Tax Regime

The UAE’s corporate tax regime is unique and incredibly business-friendly, it offers numerous advantages to the companies operating within its borders. Here are some key features that make the UAE’s corporate tax system stand out:

• The corporate tax rate is 9%.
• SME relief is available for those under a mainland license in the UAE, with revenues below 3 million dirhams.
• Corporate tax is calculated on a taxable year basis. The taxable year is typically the same as the company’s financial year.
• Corporate taxpayers are required to file an annual tax return and pay any tax due within nine months of the end of the taxable year.

Calculation of Corporate Tax in the UAE

The Corporate tax in the United Arab Emirates is calculated by applying a 9% tax rate to the company’s taxable income, which is determined as the company’s total income after subtracting any allowable deductions.

Companies operating in the UAE can benefit from a range of allowable deductions, which can significantly reduce their taxable income. These deductions are crucial in the overall corporate tax strategy.

Here are some of the key allowable deductions available:

• The cost of goods sold
• Operating expenses, such as rent, salaries, and utilities
• Interest expense
• Depreciation and amortization
• Charitable contributions

Compliance Obligations for Corporate Taxpayers in the UAE

In adherence to the UAE’s corporate tax regulations, businesses are obligated to fulfill the following key responsibilities:

• Register for corporate tax with the UAE Federal Tax Authority (FTA)
• File an annual tax return and pay any tax due within nine months of the end of the taxable year
• Keep adequate records of their income and expenses
• Allow the FTA to inspect their records upon request

Impact of Corporate Tax on Businesses in the UAE

The impact of corporate tax on businesses in the UAE will vary depending on the size and industry of the business. Small businesses are likely to be the least affected by the new tax regime, as they have been exempted from corporate tax if their annual profits are less than AED 375,000.

On the other hand, larger businesses and businesses in certain industries, such as the financial sector and the oil and gas sector, are likely to be more affected by the new tax regime. Nonetheless, it’s crucial to highlight that the corporate tax rate in the UAE remains considerably lower when compared to other nations.

How to Prepare for Corporate Tax in Dubai

If you are a business operating in the UAE, taking proactive steps to prepare for corporate tax is vital,

Here are a few strategic actions you should consider:

• Review your financial records to determine your taxable income.
• Identify any allowable deductions that you may be able to claim.
• Register for corporate tax with the UAE FTA.
• Set up a system for filing your annual tax return and paying any tax due.
• Consider consulting with a qualified tax advisor to ensure that you are complying with all of your tax obligations.

Conclusion

The introduction of corporate tax in the UAE marks a notable milestone. However, it is crucial to recognize that the tax system is still in its early stages of development. The UAE government is anticipated to release more comprehensive guidance on this in the coming months.

If you are a business operating in Dubai, it is vital to stay up-to-date on the latest developments in the corporate tax regime. It is also advisable to reach out to a proficient tax advisor to ensure full compliance with your tax obligations. Staying informed and seeking professional guidance will certainly help your business navigate this evolving landscape effectively and efficiently.