Did you know? The UAE government has passed the Federal Decree Law No. (47) of 2022 on the Taxation of Corporations and Businesses on December 9, 2022. This is the first time in UAE’s history that a direct tax is being introduced for businesses. Corporate tax is a form of direct tax levied on the net income or profit of corporations and other entities from their business. The tax will become applicable either on 1 July 2023 or on 1 January 2024, based on the financial year followed by the business. It will be applicable across all the emirates. With the introduction of this tax, the UAE government plans to accelerate its development and transformation to achieve its strategic objectives and restrict harmful tax practices.

Key Facts About UAE Corporate Tax

• A corporate tax of 9% will be implemented on taxable income exceeding AED 3,75,000 from 1st June 2023.
• Companies with taxable income of less than AED 3,75,000 will have 0% tax rate.
• Companies with taxable income including those in free zones are supposed to obtain a corporate tax registration number. This is mandatory just like VAT registration in the UAE.
• It is compulsory to file the corporate tax return.

To Whom Corporate Tax will be applicable

• All businesses and individuals conducting business activities under a commercial license in the UAE.
• Foreign entities and individuals who conduct trade or business in the UAE in an ongoing or regular manner.
• Banking operations.
• Businesses that are related to real estate management, construction, development, agency, and brokerage activities.

To Whom Corporate Tax is not applicable

• Fenced Free zone businesses that do not conduct business set up in the UAE’s mainland.
• Businesses that conduct extraction of natural resources.
• Dividends and capital gains earned by a UAE business from its qualifying shareholdings.
• Intra-group transactions and reorganizations that meet the criteria.
• An individual salary and other employment income, whether received from the public or the private sector.
• Interest and income earned by an individual from bank deposits or saving schemes.
• A foreign investor’s income obtained from dividends, capital gains, interest, royalties and other investment returns.
• Investment in real estate by individuals that includes dividends, capital gains and other income earned by owning shares or other securities.

How polestar advsiory services can guide you in corporate tax filing?

Polestar Advisory Services can provide you valuable advice on the latest developments in corporate tax. We have a team of taxation experts with years of experience who specialize in VAT filing, accounting, and bookkeeping. Get in touch with us to know more about our tax filing services.