The authorities in UAE have announced the introduction of corporate tax from 1st June, 2023. The law stipulates that a taxable person or business will be subjected to a 9% corporate tax from the start of their first financial year commencing on or after June 1, 2023.
Today, in this blog, we will answer all your questions regarding this new tax.
What is corporate tax in UAE?
Is a form of direct tax levied on the net income or profit of corporations and other business entities. It is also commonly known as ‘Corporate Income Tax’ or Business Profits Tax.’
In simple words, it is a tax levied on the net profit made by the businesses. It requires companies to pay a certain percentage of profit as tax.
Who should pay in the UAE?
All the businesses whose taxable profit (net) is more than 375,000 AED fall under the purview of corporate tax and are required to pay a certain percentage of net profit as corporate tax.
What is the rate in the UAE?
The rate is at 9% of the net profit made by the businesses. In order extent support to small businesses and start-ups, the rate will be ‘0’ % if the net profit is up to 3,75,000 AED.
What are the businesses or incomes that are outside the scope of corporate tax?
Given the profit threshold of 3,75,000 AED, all businesses that exceed the threshold have to pay the corporate tax. However, certain types of business or income are exempt from corporate tax. Below is the list of companies or income exempt from corporate tax:
- Individuals will not be subject to corporate tax. As a result, any income from employment, real estate, investments in shares, and other personal income unrelated to a trade or business in the UAE will be exempt from corporate tax.
- Not applicable to foreign investors who do not carry on business in UAE.
- Incentives are currently being offered to free zone businesses that comply with all regulatory requirements will continue.
- Capital gains and dividends received by UAE businesses from its qualifying shareholdings are exempt from corporate tax.
- Not applicable on qualifying intragroup transactions and restructurings.
Do you need more information about this new tax? Contact us so we can assist you!