At Finaxis UAE, we specialize in providing comprehensive tax solutions tailored to meet the unique needs of corporations operating in the dynamic business environment of the United Arab Emirates. Our team of experienced professionals is dedicated to helping businesses navigate the complexities of taxation laws and optimize their tax strategies for maximum efficiency and compliance.
- Our Mission
We educate and empower you on investing, taxes, and insurance, instilling confidence in your financial journey.
We simplify complex financial concepts into plain, straightforward language, eliminating the need for deciphering jargon.
We empower you with actionable recommendations, giving you complete control over your financial situation and future.
- Our Capabilities
Our Services
Corporate Taxation
Our experts are well-versed in the latest tax regulations, including Federal Decree-Law No. 47 of 2022, ensuring that your business remains compliant while minimizing tax liabilities.
Corporate Tax Registration
We offer seamless assistance in corporate tax registration, guiding you through the process and ensuring all necessary documentation is in place for a hassle-free registration.
Tax Impact Assessment
Our thorough analysis helps identify potential tax burdens and financial impacts, allowing us to provide strategic recommendations to optimize your tax position.
Tax Transaction Mapping
We meticulously map out your revenue streams and transactions, ensuring accurate classification and compliance with tax regulations.
Transfer Pricing
Our customized transfer pricing methodology ensures that related party transactions are conducted at arm's length, minimizing the risk of non-compliance.
Tax Planning
We develop tailored tax-saving strategies, including expense management, tax credits utilization, and transfer pricing strategies, to help you maximize tax efficiency.
Corporate Tax Compliance
Our team ensures that your business remains compliant with all tax laws and regulations, handling corporate tax registration, annual compliance, and responding to queries with efficiency and accuracy.
Introduction to UAE Corporate Tax
Welcome to the introduction to UAE Corporate Tax, a pivotal development in the UAE’s economic landscape. The Federal Decree-Law No. (47) of 2022 on the Taxation of Corporations and Businesses, commonly referred to as the Corporate Tax Law, has been enacted to establish a Federal Corporate Tax regime in the United Arab Emirates (UAE). This overview aims to provide a comprehensive understanding of Corporate Tax in the UAE, its implications, and key considerations for businesses operating within the jurisdiction.
Scope and Applicability
Broadly, Corporate Tax applies to the following “Taxable Persons”:
- UAE companies and other juridical persons that are incorporated or effectively managed and controlled in the UAE;
- Natural persons (individuals) who conduct a Business or Business Activity in the UAE; and
- Non-resident juridical persons (foreign legal entities) that have a Permanent Establishment in the UAE.
Juridical persons established in a UAE Free Zone are also within the scope of Corporate Tax as “Taxable Persons” and will need to comply with the requirements set out in the Corporate Tax Law. However, a Free Zone Person that meets the conditions to be considered a Qualifying Free Zone Person can benefit from a Corporate Tax rate of 0% on their Qualifying Income
Exemption
Following persons are exempt from the Corporate Tax in UAE law (subject to fulfilment of certain conditions) :-
- Government entity;
- Government controlled entity;
- person engaged in certain extractive business;
- person engaged in certain non-extractive natural resource business;
- certain qualifying investment funds;
- qualifying public benefit entity;
- pension or social security fund; and
- any other persons as may be specified in a decision issued by the Cabinet.
Corporate Tax rates
| Taxable Person | Applicable Corporate Tax rate |
| Natural persons and juridical persons | · 0% for Taxable Income up to and including AED 375,000. · 9% for Taxable Income exceeding AED 375,000 |
| Qualifying Free Zone Persons | · 0% on Qualifying Income. · 9% on Taxable Income that is not Qualifying Income |
Corporate Tax Registration
Federal Tax Authority has issued decision No 3 of 2024 on 22-February-2024 regarding registration deadlines with effective date on 01-Mar-2024. A penalty amounting AED 10,000 shall be applied where Persons fail to submit a Tax Registration application as per the prescribed timelines.
| Date of license issuance | Deadline for Submitting Registration |
| 1 January – 31 January | 31-May-2024 |
| 1 February – 28/29 February | 31-May-2024 |
| 1 March – 31 March | 30-Jun-2024 |
| 1 April – 30 April | 30-Jun-2024 |
| 1 May – 31 May | 31-Jul-2024 |
| 1 June – 30 June | 31-Aug-2024 |
| 1 July – 31 July | 30-Sep-2024 |
| 1 August – 31 August | 31-Oct-2024 |
| 1 September – 30 September | 31-Oct-2024 |
| 1 October – 31 October | 30-Nov-2024 |
| 1 November – 30 November | 30-Nov-2024 |
| 1 December – 31 December | 31-Dec-2024 |
| Where a person does not have a License at the effective date of this decision | (3) months from the effective date of this decision |
Deductible Expenses
In principle, all legitimate business expenses incurred wholly and exclusively for the purposes of deriving Taxable Income will be deductible.
Expenditure that has a dual purpose, such as expenses incurred for both personal and business purposes, will need to be apportioned with the relevant portion of the expenditure treated as deductible if incurred wholly and exclusively for the purpose of the taxable person’s business.
Examples of expenditure that is or may not be deductible (partially or in full) include:
| Types of Expenses | Deductible Criteria |
· Bribes · Fines and penalties (other than amounts awarded as compensation for damages or breach of contract) · Donations, grants or gifts made to an entity that is not a Qualifying Public Benefit Entity · Dividends and other profits distributions · Corporate Tax imposed under the Corporate Tax Law · Expenditure not incurred wholly and exclusively for the purposes of the Taxable person’s Business · Expenditure incurred in deriving income that is exempt from Corporate Tax | No Deduction |
| · Client entertainment expenditure | Partial deduction of 50% of the amount of the expenditure |
| · Interest expenditure | up to 30% of the amount of earnings before the deduction of interest, tax, depreciation and amortisation. |
Small Business Relief
Businesses with Revenues of AED 3 million or below in a relevant Tax Period and previous Tax Periods can elect for ‘Small Business Relief’ for Tax Periods that end on or before 31 December 2026.
If a Taxable Person’s Revenue exceeds AED 3 million in any Tax Period, they will no longer be eligible for Small Business Relief for that Tax Period and any future Tax Periods.
Eligible Taxable Persons will be able to elect for Small Business Relief in their Corporate Tax Return.
Accounting Standards and Methods
Taxable Persons will be required to apply the International Financial Reporting Standards (“IFRS”). In case their Revenue does not exceed AED 50,000,000, they are allowed to use IFRS for SMEs.
A Person can use Cash Basis of Accounting if their Revenue does not exceed AED 3,000,000.
If the Person’s Revenue exceeds the AED 3 million threshold, they may use Cash Basis of Accounting under exceptional circumstances and pursuant to an application approved by the Federal Tax Authority.
Tax Credits
Withholding Tax is a form of Corporate Tax collected at source by the payer on behalf of the recipient of the income. Withholding Taxes exist in many tax systems and typically apply to the cross-border payment of dividends, interest, royalties and other types of income.
Foreign tax paid on income that is also subject to UAE Corporate Tax can be deducted as a Foreign Tax Credit from the UAE Corporate Tax Payable. The maximum Foreign Tax Credit is the lower of the foreign tax paid and the UAE Corporate Tax Payable on the relevant income. Any excess Foreign Tax Credit cannot be carried forward or back to a different Tax Period.
Compliance and Reporting Obligations
All taxable persons, including Free Zone entities, are required to register for Corporate Tax, file returns, and pay taxes within prescribed deadlines. Adherence to compliance requirements is essential to avoid penalties and maintain regulatory compliance. The law promotes transparency and accountability, ensuring a level playing field for businesses operating in the UAE.
Preparing for Corporate Tax
Businesses are encouraged to proactively assess the impact of Corporate Tax on their operations, understand their obligations under the law, and implement necessary measures to ensure compliance. Seeking professional advice and staying updated on regulatory developments are crucial steps in navigating the Corporate Tax landscape effectively.
Conclusion
The introduction of Corporate Tax marks a significant milestone in the UAE’s journey towards economic diversification and sustainable growth. By embracing international best practices and fostering a conducive business environment, the UAE aims to attract investment, stimulate innovation, and drive economic prosperity for years to come.
Scope and Applicability
Broadly, Corporate Tax applies to the following “Taxable Persons”:
- UAE companies and other juridical persons that are incorporated or effectively managed and controlled in the UAE;
- Natural persons (individuals) who conduct a Business or Business Activity in the UAE; and
- Non-resident juridical persons (foreign legal entities) that have a Permanent Establishment in the UAE.
Juridical persons established in a UAE Free Zone are also within the scope of Corporate Tax as “Taxable Persons” and will need to comply with the requirements set out in the Corporate Tax Law. However, a Free Zone Person that meets the conditions to be considered a Qualifying Free Zone Person can benefit from a Corporate Tax rate of 0% on their Qualifying Income
Exemption
Following persons are exempt from the Corporate Tax in UAE law (subject to fulfilment of certain conditions) :-
- Government entity;
- Government controlled entity;
- person engaged in certain extractive business;
- person engaged in certain non-extractive natural resource business;
- certain qualifying investment funds;
- qualifying public benefit entity;
- pension or social security fund; and
- any other persons as may be specified in a decision issued by the Cabinet.
Corporate Tax rates
| Taxable Person | Applicable Corporate Tax rate |
|---|---|
|
Natural persons and juridical persons |
· 0% for Taxable Income up to and including AED 375,000.
· 9% for Taxable Income exceeding AED 375,000 |
|
Qualifying Free Zone Persons |
· 0% on Qualifying Income.
· 9% on Taxable Income that is not Qualifying Income |
Corporate Tax Registration
Federal Tax Authority has issued decision No 3 of 2024 on 22-February-2024 regarding registration deadlines with effective date on 01-Mar-2024. A penalty amounting AED 10,000 shall be applied where Persons fail to submit a Tax Registration application as per the prescribed timelines.
| Date of license issuance | Deadline for Submitting Registration |
|---|---|
|
1 January – 31 January |
31-May-2024 |
|
1 February – 28/29 February |
31-May-2024 |
|
1 March – 31 March |
30-Jun-2024 |
|
1 April – 30 April |
30-Jun-2024 |
|
1 May – 31 May |
31-Jul-2024 |
|
1 June – 30 June |
31-Aug-2024 |
|
1 July – 31 July |
30-Sep-2024 |
|
1 August – 31 August |
31-Oct-2024 |
|
1 September – 30 September |
31-Oct-2024 |
|
1 October – 31 October |
30-Nov-2024 |
|
1 November – 30 November |
30-Nov-2024 |
|
1 December – 31 December |
1 December – 31 December |
|
Where a person does not have a License at the effective date of this decision |
(3) months from the effective date of this decision |
Deductible Expenses
In principle, all legitimate business expenses incurred wholly and exclusively for the purposes of deriving Taxable Income will be deductible.
Expenditure that has a dual purpose, such as expenses incurred for both personal and business purposes, will need to be apportioned with the relevant portion of the expenditure treated as deductible if incurred wholly and exclusively for the purpose of the taxable person’s business.
Examples of expenditure that is or may not be deductible (partially or in full) include:
| Types of Expenses | Deductible Criteria | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
|
· Bribes
· Fines and penalties (other than amounts awarded as compensation for damages or breach of contract)
· Donations, grants or gifts made to an entity that is not a Qualifying Public Benefit Entity
· Dividends and other profits distributions
· Corporate Tax imposed under the Corporate Tax Law
· Expenditure not incurred wholly and exclusively for the purposes of the Taxable person’s Business
· Expenditure incurred in deriving income that is exempt from Corporate Tax |
No Deduction |
||||||||||
|
· Client entertainment expenditure |
Partial deduction of 50% of the amount of the expenditure |
||||||||||
|
· Interest expenditure |
up to 30% of the amount of earnings before the deduction of interest, tax, depreciation and amortisation. |
||||||||||
Small Business Relief
Businesses with Revenues of AED 3 million or below in a relevant Tax Period and previous Tax Periods can elect for ‘Small Business Relief’ for Tax Periods that end on or before 31 December 2026.
If a Taxable Person’s Revenue exceeds AED 3 million in any Tax Period, they will no longer be eligible for Small Business Relief for that Tax Period and any future Tax Periods.
Eligible Taxable Persons will be able to elect for Small Business Relief in their Corporate Tax Return.
Accounting Standards and Methods
Taxable Persons will be required to apply the International Financial Reporting Standards (“IFRS”). In case their Revenue does not exceed AED 50,000,000, they are allowed to use IFRS for SMEs.
A Person can use Cash Basis of Accounting if their Revenue does not exceed AED 3,000,000.
If the Person’s Revenue exceeds the AED 3 million threshold, they may use Cash Basis of Accounting under exceptional circumstances and pursuant to an application approved by the Federal Tax Authority.
Tax Credits
Withholding Tax is a form of Corporate Tax collected at source by the payer on behalf of the recipient of the income. Withholding Taxes exist in many tax systems and typically apply to the cross-border payment of dividends, interest, royalties and other types of income.
Foreign tax paid on income that is also subject to UAE Corporate Tax can be deducted as a Foreign Tax Credit from the UAE Corporate Tax Payable. The maximum Foreign Tax Credit is the lower of the foreign tax paid and the UAE Corporate Tax Payable on the relevant income. Any excess Foreign Tax Credit cannot be carried forward or back to a different Tax Period.
Compliance and Reporting Obligations
All taxable persons, including Free Zone entities, are required to register for Corporate Tax, file returns, and pay taxes within prescribed deadlines. Adherence to compliance requirements is essential to avoid penalties and maintain regulatory compliance. The law promotes transparency and accountability, ensuring a level playing field for businesses operating in the UAE.
Preparing for Corporate Tax
Businesses are encouraged to proactively assess the impact of Corporate Tax on their operations, understand their obligations under the law, and implement necessary measures to ensure compliance. Seeking professional advice and staying updated on regulatory developments are crucial steps in navigating the Corporate Tax landscape effectively.
Conclusion
The introduction of Corporate Tax marks a significant milestone in the UAE’s journey towards economic diversification and sustainable growth. By embracing international best practices and fostering a conducive business environment, the UAE aims to attract investment, stimulate innovation, and drive economic prosperity for years to come.
- Why Choose Finaxis UAE?
Expertise
Our team comprises seasoned professionals with deep expertise in all areas of taxation, ensuring that you receive the highest quality advice and support.
Tailored Solutions
We understand that every business is unique, which is why we offer customized solutions tailored to meet your specific needs and objective.
Reliability
With Finaxis UAE, you can trust that your tax matters are in safe hands. We prioritize accuracy, efficiency, and transparency in all our dealings.
Excellence
We are committed to delivering excellence in everything we do, from providing timely advice to offering ongoing support and guidance.
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Ready to optimize your tax strategy and achieve greater financial efficiency? Contact Finaxis UAE today to learn more about our comprehensive tax solutions and how we can help your business thrive in the UAE’s competitive business landscape.
