A type of direct tax known as corporate tax is assessed on the net profit or revenue generated by corporations and other legal organizations. In some other countries, corporate tax is also known as "Corporate Income Tax" or "Business Profits Tax."
Except for the extraction of natural resources, which will continue to be subject to Emirate level corporate taxes, UAE Corporate Tax will apply to all enterprises operating in the UAE. Only those foreign organizations and people who regularly conduct trade or business in the UAE will be liable to Corporate Tax.
Tax rate for taxable income up to AED 375,000 to support small businesses and startups.
Headline corporate tax rate for taxable income exceeding AED 375,000.
The Corporate Tax is going to be in effect for financial years beginning on or after June 1, 2023.
Any business that chooses a fiscal year that begins on June 1 and ends on May 31, 2024, will be liable to corporate tax as of that day. By the end of 2024, the first tax return submission is most likely required.
Any business that adopts a calendar year that begins on January 1 and ends on December 31, 2023, will be liable to corporate tax beginning on January 1 of the following year, and filing will likely be required around the middle of 2025.
All companies and commercial activities taking place inside the seven emirates are subject to the federal tax system that the United Arab Emirates has put in place.
It's important to note that the UAE Federal Tax Law will now apply to the international banking industry, which previously operated under the Emirate level Bank tax edict. We'll let you know in due time how Corporate Tax will affect the banking tax edict at the Emirate level. This will mark a big change for local banks, who, like other firms, will now be liable to corporation tax, as well as for international bank branches that must adapt to the new Law.
In general, the following income is free from income tax:
With regard to the exempt income scheme, it can be predicted that the Law will include a participation exemption or other similar concepts frequently seen in international markets, and businesses will need to assess their ability to satisfy any applicable requirements in order to take advantage of the exempt income scheme.