UAE Tax Laws explained

We are all aware that as of June 1, 2023, the UAE has introduced a federal corporate tax system, marking a significant shift in its fiscal landscape. 

As a PRO consultant, we break down these changes and provide insights on how we can help businesses navigate this new terrain effectively.

Tax Rates
The UAE corporate tax rates are structured to support both small businesses and larger enterprises:

• 0% Tax Rate: Applied to taxable income up to AED 375,000.

• 9% Tax Rate: Applied to taxable income exceeding AED 375,000.

• Special Rates for Multinationals: Different rates may apply to large multinational corporations meeting criteria set by the OECD Base Erosion and Profit Shifting (BEPS) rules.

Scope of the Tax
The corporate tax applies to all business and commercial activities conducted in the UAE, with the exception of natural resource extraction, which continues to be subject to Emirate-level taxation. Businesses in free zones can still benefit from tax incentives provided they do not engage in business with the UAE mainland.

Exemptions and Exclusions
Certain incomes and transactions are exempt from the new corporate tax:

• Natural Resource Extraction: Continues under Emirate-level corporate taxation.

• Dividends and Capital Gains: Earnings from qualifying shareholdings are exempt.

• Intra-Group Transactions and Reorganisations: May be exempt if they meet specific conditions.

Determining Taxable Income
Taxable income is based on the accounting profits of a business as per financial statements prepared according to internationally accepted accounting standards. Adjustments will be made for certain items such as:

• Unrealized Gains or Losses

• Exempt Income

• Non-Deductible Expenses

Compliance Requirements
All businesses must register for corporate tax and comply with filing requirements:

• Annual Tax Returns: Businesses are required to file an annual tax return and settle any tax liabilities.

• Federal Tax Authority (FTA): The FTA is tasked with the administration, collection, and enforcement of corporate tax, providing necessary guidance to businesses.

The UAE’s new corporate tax regime aligns its fiscal policies with global standards while maintaining its appeal as a business-friendly environment. As  PRO consultants, we can help you navigate these changes, ensuring your business is well-prepared to comply with the new regulations and optimise its tax strategy. Stay informed, plan strategically, and let’s turn these changes into opportunities for growth and resilience in the dynamic UAE market.