Exempted Individuals/companies for Corporate Tax

The business scene in the UAE is really booming! Lots of new investments and chances are popping up, and things are changing for the better. In July 2022, the national economic data showed a 1.9% increase in the number of active businesses compared to before. Most of these businesses, about 80%, are in Abu Dhabi, Sharjah, and Dubai. Dubai takes the biggest slice, with 46% of all licensed businesses in the country.

Now, there's this thing called Corporate Tax that the UAE started in June 2023. But don't worry, not all businesses have to pay for it. Here's who doesn't have to:

• Small and medium-sized businesses making up to AED 375,000 in revenue.
• Companies in Free Zones get some extra perks along with not paying corporate tax.
• If your business is not on the Mainland, you're safe.
• You won't get taxed on the money you make from dividends or selling shares.
• Internal business transactions are also tax-free.

But there are some types of businesses that can't dodge the tax unless they meet certain conditions. These are:

• Government Entities
• Government-Affiliated Entities
• Companies dealing with natural resources
• Public Benefit Entities
• Investment Funds

Now, for government entities, here's the deal:

• They don't have to pay Corporate Tax unless they're doing business under a special license.
• If they do, they have to keep their business finances separate from other government stuff.
• They have to calculate their taxable income separately for their business activities.
• Any dealings between their business and other government stuff are watched closely.
• If they want their business to be considered a separate taxable entity, they have to ask the authorities nicely.
• So, there you have it! A simple guide to understanding Corporate Tax and who needs to worry about it in the UAE.

Government-Affiliated Groups

• These groups don't have to pay corporate taxes, and certain rules don't apply to them.
• These rules only affect the groups if they're doing non-essential activities.
• Non-essential activities are treated separately, like their own businesses, with separate financial records.
• They figure out taxes for these non-essential activities on their own, following specific laws.
• Any non-essential transactions are treated as related party transactions, following certain laws.

Tax Exemption for Extractive Businesses

• If someone meets certain conditions, they don't have to pay corporate taxes for their extractive business.
• If someone inherits income from both extractive and other businesses, they might also get a tax break if certain conditions are met.
• If income from other businesses supporting the extractive one is less than 5% of total revenue, it's not counted.
• For other businesses, expenses are divided based on revenue, unless the rules for the extractive business say otherwise.
• If the local government taxes income or profit related to extractive business, these rules apply.
• These tax breaks don't apply to certain roles within the extractive business, like contractors or subcontractors.

Non-Extractive Natural Resource Business

If you're involved in a Non-Extractive Natural Resource Business and meet these conditions, you might not have to pay Corporate Tax:

• You have a permit or license from the Local Government.
• Your income solely comes from controlling a business related to this.
• You're heavily affected by Corporate Tax laws in your area.
• You've informed the Ministry as required.

If you earn from both a Non-Extractive Natural Resource Business and another taxed business, here's what happens:

•  Your Non-Extractive Natural Resource Business income is taxed according to rules.
•  Income from other businesses follows regular tax laws unless exempt.

You won't be taxed for supporting businesses if they earn less than 5% of your total revenue.

Taxes for other businesses are calculated separately, with shared expenses allocated accordingly.

You're affected by local taxes if they apply to your Extractive Business.

These exemptions don't apply to certain roles in the Non-Extractive Business.

Qualifying Public Benefit Entity

These entities might not have to pay Corporate Tax if they meet these conditions:

•   They're set up for religious, charitable, or similar purposes.
•    They're not engaged in other profit-driven activities.

No profits go to individuals unless they're also part of a qualifying entity.

Additional conditions might apply based on government decisions.

These exemptions start when the entity is recognized by the government.

The Authority can ask for information to ensure compliance.

How Can Resyon Badger Help?

If you're worried about understanding Corporate Tax laws in the UAE, Reyson Badger Auditing Dubai is here for you! We have the best tax consultants who know all about tax rules and stay up-to-date with any changes made by the FTA. You can count on us for any questions or help you need with Corporate Tax.