The authorities in UAE had already announced the introduction of corporate tax in 2022. The corporate tax or CT is now applicable across the UAE and businesses must start preparing for corporate tax registration. Since the corporate tax is announced, there is a buzz going on among businesses. Some businesses are finding it beneficial, but some are finding it difficult to know the impact of the corporate tax on their business.
As corporate tax is now applicable in UAE, businesses must have a good concept of corporate tax and be prepared for it.
Let’s get started.
UAE Corporate tax from 1st June 2023
A corporate tax is a tax based on the profit rate of a corporation. Corporate tax is a form of direct tax levied on the net profit or income. Federal Tax Authority is in charge of corporate tax and all businesses will have to report to the FTA for further proceedings.
All businesses who are having taxable profits of more than 375,000 AED are eligible to pay corporate tax in UAE. These businesses are required to pay a certain percentage of net profit to the UAE government.
UAE has a lower corporate tax; the corporate tax rate is 9% of the net profit made by the businesses in their respective financial year.
The government has really thought of the start-ups and small businesses because they will have to pay 0 % amount of CT if they have a net profit of less than 375,000 AED.
What is needed to be prepared for CT?
According to the Federal Degree Law. No 47 of 2022, the date of implementing the corporate tax is effective from the financial year starting on or after 1st June 2023. As we have entered the year 2023, it is crucial for businesses to start preparing for corporate tax. Now let’s see if your business is out of the source of corporate tax or not.
- An individual is not subjected to corporate tax. Any income from real estate, employment, investment in shares, or other personal income unrelated to business or trade in the UAE is exempted from CT.
- UAE corporate tax is not applicable to foreign investors who are not carrying on business in UAE. Free zone businesses are offered corporate tax incentives.
- Dividends and capital gains received by UAE businesses from qualifying shareholdings are also exempted from CT.
- Corporate tax is not applicable on qualifying intragroup transactions and restructurings.
All businesses that are eligible need to know the requirements for registration and start planning to register.
All the companies in UAE falling under the cognizance CT will have to register with the FTA. If the business has not registered for corporate tax, then the FTA will enroll that entity.
The corporation can also send an application to get deregistration in cases like liquidation or expiration.
Each tax return must submit to FTA within 9 months of the end of the Tax period and the payment may also be paid in the same period. Make sure to know everything you need to know before paying the CT and you can also get assistance to calculate your corporate tax.
If you want to reach out to our accountants for a meaningful discussion on corporate tax, call +971 (04) 241 2929.