Corporate tax in the UAE: a new reality for businesses

15.06.2023

• Who is liable to pay corporate tax in the UAE
• Corporate tax rates
• Exempt from corporate tax

Corporate tax is a form of direct tax levied on the net income or profits of corporations and other organisations from their business.

It was introduced in the UAE as of 1 June 2023. We'll tell you what we've found out.

Who is liable to pay corporate tax in the UAE

1. all enterprises and natural persons carrying on business under a commercial license in the UAE and on a permanent basis through permanent establishments;
2. free zone enterprises (which do not operate a business established in the UAE mainland).
3. foreign entities only if they are engaged in trade or business in the UAE on a permanent or regular basis.

Corporate tax rates

• 0% for taxable income up to AED 375,000 per year
• 9% on taxable income over AED 375,000 per year

For Free Economic Zones:

• 0% on qualifying income as determined by a decision of the Cabinet of Ministers;
• 9% on taxable income that is not qualifying income.

 

Exempt from corporate tax

1. Enterprises engaged in natural resource extraction, as these enterprises will continue to be subject to the current UAE-level corporate taxation imposed on this type of activity. Such companies give 25% on incorporation, after 5 years another 25%, and after 8 years after incorporation another 25% of the explored area to the state, and pay income tax at the rate of 60%. Foreign nationals may have no more than 49% of an interest in such a company. 
2. Dividends and capital gains received by a business in the UAE from its respective shares.
3. Qualifying intra-group transactions and reorganisations (if the necessary conditions will be met) - revenues of the same company between different jurisdictions.
4. Individual salaries and other income from employment, irrespective of public or private sector.
5. Interest and other income received by a natural person from bank deposits or other savings schemes.
6. Income of a foreign investor from dividends, capital gains, interest, royalties and other investment income.
7. Real estate investments by natural persons.
8. Dividends, capital gains and other income received by natural persons from holding shares or other securities.

For further information you can contact our lawyers in the UAE at uae@revera.legal 

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