- Riikka Kytosaari
UAE WILL INTRODUCE CORPORATE TAX 2023
Updated: Jun 22, 2022
Ministry of Finance in the UAE has announced that it will introduce federal Corporate Tax (CT) on the net profits of businesses. Based on initial schedule, the tax will become applicable on 1 July 2023 and applied across all the emirates.
Corporate tax is a form of direct tax levied on the net income or profit of corporations and other entities from their business. Main aim of the CT is to reaffirm UAEs commitment to meeting international standards for tax transparency and preventing harmful tax practices. In addition, the CT accelerates UAEs development and transformation to achieve its strategic targets.
The CT will apply to all businesses and individuals conducting business activities under a commercial license in the UAE, free zone businesses, foreign entities, and individuals only if they conduct a trade or business in the UAE in an ongoing or regular manner, banking operation and businesses engaged in real estate management, construction, development, agency, and brokerage activities.
Exemptions from CT apply only to the businesses engaged in the extraction of natural resources, dividends and capital gains earned by a UAE business from its qualifying shareholdings will be exempt from CT, qualifying intra-group transactions and reorganizations will not be subject to CT, provided the necessary conditions are met.
Federal Tax Authority will be responsible for the administration, collection and enforcement of the CT. The rates will be 0 per cent for taxable income up to AED 375,000, 9 per cent for taxable income above AED 375,000 and a different tax rate (not yet specified) for large multinationals that meet specific criteria set with reference to 'Pillar two' of the OECD Base Erosion and Profit Sifting Project.