UAE Corporate Tax Law

According to the UAE Corporate tax law, businesses earning annual taxable profits up to AED 375,000 will be exempt from taxes starting June 1, 2023. For profits exceeding this threshold, a 9% tax rate will apply. This law establishes the framework for a Federal Corporate Tax Law in the UAE, effective from June 1, 2023. The federal decree law outlines the criteria, tax rates, and other pertinent details necessary for businesses preparing for corporate tax implementation. This tax, levied directly on business profits, was introduced in the UAE to fortify its position as a premier global hub for business and investment.

According to the UAE's Corporate Tax Law, profits exceeding Dh375,000 will be taxed at a standard rate of 9%, while small firms and start-ups with profits up to this threshold will enjoy a 0% tax rate. Corporate Tax not only supports the growth and transformation necessary to achieve strategic goals but also reinforces the commitment to adhering to international standards of transparent taxation and preventing fraudulent practices.

When will Corporate Tax take effect?

As outlined in the UAE's corporate tax legislation, it will be applicable for financial years commencing after June 2023, which is six months from now. For example:

• Businesses operating with a financial year spanning from July 1, 2023, to June 30, 2024, will be subject to corporate tax starting from July 2023.
• Businesses with a financial year spanning from January 1, 2023, to December 31, 2023, will be subject to corporate tax starting from January 1, 2024, marking the first financial year following June 2023.

What does the UAE Corporate Tax Law entail?

The federal decree law, issued by the FTA in December, encompasses a wide array of subjects, including corporate tax rates for businesses, free zone individuals, taxable persons, and other regulatory provisions. It also addresses topics such as the imposition of corporate tax, exemptions, deductions, and more.

The Corporate Tax law is organized into 20 chapters, each containing numerous articles pertaining to corporate taxation. Below is the table of contents for the Federal Decree Law.

• General Provisions
• Imposition of CT and CT Rates
• Exempt Persons and Businesses
• Taxable Person and Corporate Tax Base
• Free Zone Person
• Calculating Taxable Income
• Exempt Income
• Corporate Tax Reliefs
• Deductions and Expenditure
• Transactions with Related Parties and Connected Persons
• Tax Loss Provisions
• Tax group Provisions and Formation
• Calculation of Corporate Tax Payable
• Payment and Refund of Corporate Tax
• Anti Abuse Rules
• Corporate Tax Registration and Deregistration
• Tax Returns and Clarifications
• Violations and Penalties
• Transitional rules
• Closing Provisions

What is the standard rate of Corporate Tax?

As per the federal decree law finalized by the FTA, the Corporate Tax rates are as follows:

• 0%: for income up to AED 375,000
• 9%: for income exceeding AED 375,000

How do you calculate Corporate Tax if the revenue exceeds AED 400,000?

• Given that income up to AED 375,000 incurs no tax (0% - NIL), and income exceeding AED 375,000 is taxed at 9%, here's the calculation:
• Income exceeding AED 375,000 (AED 400,000 - AED 375,000 = AED 25,000) at 9% = AED 2,250
• Hence, the Corporate Tax for the financial year amounts to 0 + AED 2,250 = AED 2,250.

Will Free Zones be affected by Corporate Tax?

Yes, Corporate Tax will impact businesses operating within the free zones of the UAE. However, free zone enterprises that comply with regulatory requirements and exclusively operate within the free zones without conducting business in the mainland UAE may still benefit from corporate tax exemptions. Free zone entities are obligated to register and submit corporate tax returns.

How can Reyson Badger assist you with Corporate Tax Services?

At Reyson Badger, we offer unparalleled Corporate Tax Services in the UAE, designed to guarantee full compliance with the latest UAE  Corporate tax  law regulations. As leading financial consultants, we deliver top-tier services tailored to your corporate tax needs, guiding you through regulatory compliance and ensuring adherence to tax laws.