On 9 December 2022, the Ministry of Finance of the UAE published the Law on Taxation of Corporation and Businesses (“CT Law”) which provides the legislative basis for implementing a Federal Corporate Tax (“CT”) in the UAE. It is expected that the introduction of CT in the UAE will cement its position as a leading jurisdiction for business and investment considering its extensive double tax treaty network.
CT will be effective from financial years starting on or after 1 June 2023 at tax rates of 0% on taxable income not exceeding AED 375,000 and 9% on taxable income exceeding AED 375,000.
CT applies to legal persons incorporated in the UAE (both mainland and free zone) and legal persons incorporated outside the UAE, but effectively managed and controlled in the UAE, as well as to foreign legal persons that have a permanent establishment in the UAE. Natural persons will be subject to CT only if they are engaged in a business or business activity in the UAE.
Persons established in free zones that meet the conditions to benefit from the Free Zone CT regime (“Qualifying Free Zone Persons”) will be subject to CT at the following rates:
- 0% on qualifying income
- 9% on taxable income that does not meet the qualifying income definition
Implications of CT to your business
The implications of the new CT regime are broad for all businesses and natural persons conducting business activity in the UAE. Legal and natural persons should begin to assess the implications of the new tax legislation. This includes assessing the application of the provisions of new tax legislation and its impact on your business and corporate structure, modelling the cash flow implications, considering the exemption regimes, and developing the processes and procedures to manage compliance.
Persons (including free zones) subject to CT in the UAE will be required to register, file a tax return and pay any tax due no later than nine months after the end of the financial year. Additionally, taxable persons may be requested to submit financial statements to the tax authorities.
How we can assist
Our team comprising highly experienced tax and accounting professionals can assist you with professional advice about the new CT regime and its impact on your business as well as registration, filing CT returns and paying tax dues. We can also help you with maintaining accounts and preparing financial statements for tax purposes.