The Federal Decree-Law No. (47) of 2022 on the Taxation of Corporations and Businesses was issued by the United Arab Emirates on 09 December 2022. This Corporate Tax will take effect for financial years starting on or after 1 June 2023.
The threshold of Dh375,000 has been included in order to support small and medium enterprises, and startups and make the economy more competitive. It is important to note that the corporate tax shall be imposed on profits accrued and not on the total turnover of the business.
Importantly, the corporate tax will not be applied to individuals’ salaries or their income from employment. In addition, personal income earned from bank deposits or savings programs and investments in real estate by individuals in their personal capacity is also not subject to tax.
The introduction of Corporate Tax is intended to help the UAE achieve its strategic objectives and accelerate its development and transformation. The certainty of a competitive Corporate Tax regime that adheres to international standards, together with the UAE’s extensive network of double tax treaties, will cement the UAE’s position as a leading jurisdiction for business and investment.
Exemptions on UAE Corporate Tax
According to the law, free zone companies in UAE which fulfill all conditions specified in the Executive Regulations of the UAE Corporate Tax Law will be exempt from corporate tax.
Natural resource extraction activities are also exempted but they’re subject to existing emirate-level taxation. Government entities, pension funds, investment funds, and public benefit organizations are also beyond the scope of corporate tax.
The corporate tax shall be imposed on taxable persons which includes residents, certain non-residents, and free zone persons generating profits of over Dh375,000 per annum.
The non-residents are also subject to nine percent of tax if they have a permanent establishment in UAE as well as income from the sale of goods, provision of services, etc. in the country.
All taxable persons shall be obligated to maintain records and documents for seven years following the end of the tax period.
Under the law, annual corporate tax returns will be required to be filed by all taxable persons no later than nine months from the end of the relevant tax period.
sources: https://mof.gov.ae/corporate-tax/ ; Khaleej Times