UAE Federal Corporate Tax

UAE Federal Corporate Tax

On 31 January 2022, the UAE Ministry of Finance announced that effective 1 June 2023, Corporate Tax (CT) will be applied on all taxable company profits across the Emirates, with the Federal Tax Authority responsible for the administration and compliance for this new tax regime.

The move has been designed as part of the UAE’s commitment to avoid tax avoidance and tax evasion by global organisations, and follows off the back of the Value Added Tax (VAT) regime which was implemented in 2018.

CT will be payable based on profits reported in financial statements prepared in accordance with internationally acceptable accounting standards with minimal adjustments.

The CT rates from 1 June 2023 are:

• If the net profit of the business is more than AED 375,000, there will be a standard statutory tax rate of 9 percent.

• If the net profit is AED 375,000 or less, a 0 percent tax rate will apply. This is designed to support small businesses and start-ups and reduce their administrative burdens.

No CT will apply on personal income from employment, income from real estate and other investments, investment returns and other income earned by individuals in their personal capacity that is not related to UAE trade or business. UAE CT will also not apply to dividends, capital gains and other investment returns earned by foreign investors.

Company set ups in the Free Zones will continue to enjoy a tax-free environment provided that they do not conduct business with mainland UAE and comply with all regulatory requirements. However, businesses established in a Free Zone will still be required to register and file a CT return.

As most businesses have a calendar financial year of 1 January – 31 December, the majority of UAE businesses should only become subject to UAE CT from 1 January 2024 onwards.

How Sanctuary can help

Sanctuary are here to assist you with advice around the impact CT will have on your business, as well as to provide a detailed analysis of the legalisation as it becomes available. Sanctuary also have a highly experienced team of tax and accounting specialists, who can assist with the implementation of your companies CT filings, preparing and submission of applications, as well as provide on-going tax and accounting support.

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