Corporate Tax In UAE

Corporate Tax UAE 2023

As we enter 2023, managing corporate tax in the UAE becomes crucial. With the execution of the Federal Corporate Tax, it is crucial for companies to stay informed and driven. Planning this new Corporate Tax Law can be difficult, but we are here to support you throughout the process and ensure compliance.

Here are the key points of Corporate Tax UAE 2023

• In regards to UAE Corporate Tax for 2023, it is important to note that companies are required to fulfill self-assessment responsibilities. This includes filing their tax returns and making the necessary tax payments within six months following the conclusion of the financial year.
• Under this law, companies with taxable income exceeding AED 375,000 will be subject to a 9% tax rate
• It will come into effect from June 1, 2023.
• The Corporate Tax Law applies to all companies and commercial activities in the UAE, as per the provisions issued by the authority. 
• Tax grouping will be allowed, enabling related entities to merge their tax reporting and enjoy tax advantages.
• Businesses will have the opportunity to carry forward and offset losses incurred in one financial period against taxable income in the next periods, reducing their tax liability as per the provisions published by the authority. 

Corporate Tax Rate in UAE

The UAE’s tax framework, known for its competitiveness, serves as a magnet for both domestic and international companies, attracting them to establish their operations in UAE. It is essential for businesses to have a comprehensive understanding of the corporate tax rate in order to effectively manage their tax obligations.

Here is an overview of the corporate tax rate in UAE:

• The UAE has implemented a corporate tax rate of 9% exceeding AED 375,000 that applies to most companies and commercial activities.
• Residents have this tax rate, while free zone persons have different treatments based on income.
• 0% tax rate for taxable income up to AED 375,000, providing relief for smaller companies.
• 9% tax rate for taxable income above AED 375,000, ensuring a fair contribution from medium to large-sized companies.
• 15% rate for multinational corporations with global revenue over AED 3.15 billion, promoting fair taxation.

Corporate Tax Exemption UAE

The UAE government has set a taxable income threshold of AED 375,000 to lessen the effect of the new corporate tax rate. Companies with income under the threshold won’t face corporate tax. Plus, exemptions and deductions help lessen the tax load.

Also, Under the new UAE Corporate Tax Law, certain entities and industries are exempt from

Here are the key exemptions:

1. UAE Government Entities: Federal, emirate, and local government entities are exempt from Corporate Tax.
2. UAE Government-Controlled Entities: Entities controlled by the UAE government, directly or indirectly, are exempt from Corporate Tax.
3. Extractive Businesses: Companies involved in extracting natural resources like oil, gas, and minerals are exempt from federal Corporate Tax. Instead, they remain subject to Emirate-level corporate taxation.
4. Non-Extractive Natural Resource Businesses: Some non-extractive natural resource industries are exempt from corporate tax according to the authority’s guidelines.

Corporate Tax in UAE for free zone

Free Zone Entities are companies registered in a UAE free zone, which are special economic zones offering benefits such as tax exemptions and low operating costs. These entities have a 0% corporate tax rate on qualifying income, as specified by the authority, unlike mainland UAE companies.

Corporate Tax Registration in UAE

Corporate tax registration is essential for UAE companies. Entities must follow the Federal Tax Authority (FTA) guidelines to avoid penalties. Understanding the process and meeting obligations is crucial.

Here are the key points to know about corporate tax registration:

1. Rule: All companies in the UAE, including companies, partnerships, branches, and permanent establishments, are required to register for corporate tax.
2. Registration Timeline: Corporate tax registration is necessary before the start of the financial year in which the business becomes liable for corporate tax.
3. Registration Process: Register for corporate tax by submitting necessary documents like trade license, memorandum and articles of association, certificate of incorporation, and power of attorney (if applicable) to the Federal Tax Authority (FTA).
4. Compliance Obligations: After registration, companies must meet tax compliance duties such as submitting tax returns, keeping accounting records, and paying taxes on time.
5. Penalties for Non-Compliance: Not registering for corporate tax or following the regulations may lead to penalties by the FTA, such as fines, interest charges, and legal issues.

Corporate Tax Filing

1. Reporting Requirements: Companies need to report their taxable income and calculate the applicable tax liability. Taxable income is the accounting net profit of the business, determined by International Accounting Standards (IAS), with adjustments for specific items as specified under the UAE corporate tax law.
2. Supporting Documentation: It is important to maintain proper records and documentation to support the figures reported in the tax return. These may include financial statements, transaction records, invoices, receipts, and other relevant documents.
3. Audit Possibility: The FTA has the authority to conduct tax audits to ensure compliance with the tax laws. Companies should be prepared to provide any requested documentation or information during an audit. Non-compliance with an audit request may result in more penalties.

Corporate Tax Penalties

Non-compliance with the corporate tax law may lead to imposing fines & penalties by the authority. This may result in penalties for late filing or non-payment, penalties for underreporting or misreporting income, penalties for failure to keep records, penalties for failure to follow an audit request, etc.

How to avoid Corporate Tax Penalties

The best way to avoid penalties is to file your tax return on time, pay the tax due, and keep accurate records. You can consult with us if you have any questions about the tax law. We are happy to provide our professional tax advisory services.

Khalid Alhassawi Auditing: Your Trusted Corporate Tax Consultants

Khalid Alhassawi Auditing ( KA Auditing) is a leading accounting and auditing firms in Dubai that can help you follow the new Corporate Tax Law. Our team of skilled professionals is well-equipped to guide companies through the complexities of the corporate tax world and ensure full compliance with the latest tax laws. With our expertise, we can provide valuable support in managing the complexities of corporate taxation, ensuring accurate flings, and minimizing any potential risks or errors. We offer a wide range of corporate tax services, including:

• Tax planning and compliance
• Tax audit
• Tax appeals
• Tax registration and tax filing
• Tax review
• Tax advisory