UAE Corporate Tax 2023 -An Over view
UAE corporate tax 2023/UAE Corporate Tax Rate : The United Arab Emirates (UAE) Ministry of Finance (MoF) announced on 31 January 2022 that the region’s tax landscape would undergo another change when it announced that a new federal corporate tax system (CT) would be implemented beginning with the financial year 2023.
It is recommended that UAE corporate tax rates be set at a standard rate of 9%, the lowest corporate income tax rate in the GCC region
The key points
- UAE corporate tax start date
- UAE corporate tax and its applicability
- UAE corporatr tax rate
- Corporate Tax registration
- Effective date
- Excempt Incomes
- UAE Corporate tax 2023 Free zones
The UAE CT will be applicable for financial years starting on or after 1 June 2023.
Any company that adopts a fiscal year starting on 1 June 2023 and ending 31 May 2024 will be subject to CT starting 1 June 2023. The first tax return filing is likely to be due towards the end of 2024.
Any company that adopts a calendar year starting 1 January 2023 and ending 31 December 2023 will be subject to CT starting 1 January 2024 and filing is likely to be due towards mid-2025.
UAE corporatr tax rate
The announced UAE CT regime introduces a tier system with 3 rates:
- All annual taxable profits that fall under AED 375,000 shall be subject to zero rate.
- All annual taxable profits above AED 375,000 shall be subject to 9% rate.
- ALL MNEs that fall under the scope of Pillar 2 of the BEPS 2.0 framework (i.e. consolidated global revenues in excess of AED 3.15 billion) shall be subject to different rates as per OECD Base Erosion and Profit-Sharing rules.
The following income shall be in general exempt from income Tax:
- Dividend income earned by UAE company from its qualifying shareholdings (to be defined in the law)
- Capital gains
- Profits from group reorganization
- Profits from Intra-group transactions
There will be no UAE withholding tax on domestic and cross-border payments.
Considering the exempt income scheme it can be anticipated that the Law shall include a participation exemption or similar principles commonly seen in international markets and businesses would need to evaluate if they will be able to meet the prescribed conditions (if any) to avail the exempt income scheme.
Free zones and UAE CT
The UAE intends to honor its commitment to businesses registered in Free Trade Zones to the extent that such businesses do not conduct business with mainland shall be subject to zero percent tax (or be exempt as the case may be) until the end of the holiday period. All free zones have to file an annual CT return.
Taxpayers are expected to prepare and maintain financial statements for the purposes of calculating their taxable income, and should maintain all documents and records that support the information in the CT return or in any other filing made with the Authority.
Exempt persons are required to maintain all records to support their exempt status.
Records and documents should be kept for at least seven years following the end of the relevant Tax Period.
UAE corporate tax 2023 Registration
Taxpayers will be able to electronically register for UAE CT through the website of the Federal Tax Authority. Further guidance on this will be provided in due course. There is no registration threshold for UAE CT.