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Corporate Tax in UAE

The introduction of Corporate Tax has changed the financial landscape of UAE, marking a significant shift in how businesses operate in the region. Implemented by the UAE Ministry of Finance on December 9, 2022, and effective for financial years starting June 1, 2023, this direct tax on corporate net income remains one of the lowest globally. HLB HAMT Management Consultancy (HHMC) is here to assist businesses in managing the complexities of this new tax regulation. Our expertise ensures compliance and helps minimize the burden, supporting UAE’s commitment to fiscal transparency and financial discipline. Trust HLB HAMT Management Consultancy (HHMC) to guide you through corporate taxation with confidence.

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Introduction to Federal Corporate Tax in UAE

The introduction of the Federal Corporate Tax (CT) in the UAE marks a pivotal moment for businesses in UAE. This tax framework is designed to enhance fiscal revenues while promoting a competitive business environment.

Corporate Tax Law in UAE

On December 9, 2022, the UAE released Federal Decree-Law No. (47) of 2022 on the Taxation of Corporations and Businesses, referred to as the Corporate Tax (CT) Law. This legislation will apply to Taxable Persons for financial years commencing on or after June 1, 2023. The CT Law is aligned with international best practices while keeping the compliance burden to a minimum, making it one of the most competitive tax regimes globally.

Applicability of the CT Law

The Corporate Tax is applicable across all Emirates, including UAE, and covers all business and commercial activities. Notably, the extraction of natural resources will continue to be subject to Emirate-level taxation. Free zone businesses are also included under the scope of the UAE CT and are categorized into two types of income: Qualifying income, which is subject to 0% tax, and non-qualifying income, which is taxed at a rate of 9%.

Exemptions and Special Provisions in UAE

Certain categories of taxpayers are exempt from the CT, structured as follows:

  1. Automatically Exempt:
    • Government entities.
    • Government-controlled entities specified in a cabinet decision.
  2. Exempt if Notified to the Ministry of Finance (subject to meeting certain conditions):
    • Extractive businesses.
    • Non-extractive natural resource businesses.
  3. Exempt if Applied to and Approved by the FTA (subject to meeting certain conditions):
    • Qualifying public benefit entities.
    • Public and private pension and social security funds.
    • Qualifying investment funds.
    • Wholly owned and controlled UAE subsidiaries of a government entity, a government-controlled entity, a qualifying investment fund, or a public or private pension or social security fund.
    • Corporate tax will not apply to dividends or capital gains that a UAE business makes from its qualifying shareholdings.
    • Qualifying intra-group transactions and reorganizations will not be subject to corporate tax, provided the necessary conditions are met.

Additionally, the following incomes are exempt from the UAE Corporate Tax:

  • Salaries and other employment income, whether received from the public or private sector.
  • Interest and other income earned from bank deposits or savings schemes by individuals.
  • Foreign investors’ income derived from dividends, capital gains, interest, royalties, and other investment returns.
  • Income from investments in real estate conducted by individuals in their personal capacity.
  • Dividends, capital gains, and other income received by individuals through their ownership of shares or other securities.

Impact on Businesses in UAE

The CT Law aims to foster financial discipline and proper record-keeping within the corporate sector. The tax is levied on the accounting net profit reported in the financial statements of the business, with exceptions and adjustments as necessary. Incomes such as employment income, personal investments, and other non-business-related earnings remain exempt from the UAE CT.

Filing and Compliance Requirements

Businesses are required to file their corporate tax returns electronically for each financial period within nine months from the end of their financial year. Notably, there is no requirement for advance CT payments, and UAE group companies can form a tax group to file a single return, further easing the compliance process.

How HLB HAMT Management Consultancy (HHMC) can assists you?

At HLB HAMT Management Consultancy (HHMC), we are committed to helping you understand and manage the implications of the UAE Corporate Tax (CT) on your Abu dhabi business. Our structured approach ensures that you are well-equipped to adapt to the new tax environment and capitalize on growth opportunities.

  1. In-Depth Impact Assessment
  • Qualitative Analysis: We evaluate the implications of the UAE CT and transfer pricing (TP) regulations on your operations.
  • Financial Evaluation: We assess the potential financial impact of UAE CT on your business.
  • Opportunity Identification: We identify restructuring and optimization options for improved efficiency.
  • System Adjustments: We highlight necessary changes to ensure compliance with regulations.
  1. Strategic Implementation Solutions
  • Contract Amendments: We assist in revising contracts and legal agreements to align with tax requirements.
  • Transfer Pricing Policies: Our experts develop tailored transfer pricing policies.
  • Structural Adjustments: We help implement changes in your organizational structure.
  • Clarifications and Rulings: We secure necessary tax clarifications and rulings.
  • CT Group Applications: We assist in applying for corporate tax groups and exemptions.
  • Governance Framework: We enhance your tax function and governance framework.
  • System Updates: We support the implementation of required system changes.
  • Training Sessions: We provide training to keep your team informed about new regulations.
  1. Ongoing Support and Compliance
  • CT Registration: We guide you through the registration process.
  • Tax Applications: We manage submissions for tax groups and exemptions.
  • CT Returns: We prepare and submit your corporate tax returns accurately and on time.
  • Transfer Pricing Support: We assist with the preparation and filing of transfer pricing documentation.
  • Tax Accounting Help: We offer tax accounting and provisioning support for a smooth transition.

At HLB HAMT Management Consultancy (HHMC), we are your trusted partners in ensuring compliance, enhancing financial performance, and unlocking opportunities within the evolving corporate tax landscape. Let us guide you through this transition with confidence.

Excellence in Corporate Tax  services with HLB HAMT Management Consultancy (HHMC)! Get in touch today: Call us or Email us. Your success is our priority!

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