Corporate Tax in UAE from 1st June '23

Corporate tax is a form of direct tax levied on the net income or profit of corporations and other business entities. It is also commonly known as 'Corporate Income Tax' or Business Profits Tax.

In simple words, it is a tax levied on the net profit made by the businesses. It requires companies to pay a certain percentage of profit as tax.

All the businesses whose taxable profit (net) is more than 375,000 AED fall under the purview of corporate tax and are required to pay a certain percentage of net profit as corporate tax.

The corporate tax rate is at 9% of the net profit made by the businesses. In order extent support to small businesses and start-ups, the corporate tax rate will be '0' % if the net profit is up to 3,75,000 AED.

The date of implementing the corporate tax is effective from the financial year starting on or after 1st June, 2023.

Given the profit threshold of 3,75,000 AED, all businesses that exceed the threshold have to pay the corporate tax. However, certain types of business or income are exempt from corporate tax. Below is the list of companies or income exempt from corporate tax:

Individuals will not be subject to corporate tax. As a result, any income from employment, real estate, investments in shares, and other personal income unrelated to a trade or business in the UAE will be exempt from corporate tax

Not applicable to foreign investors who do not carry on business in UAE

Corporate tax incentives are currently being offered to free zone businesses that comply with all regulatory requirements will continue.

Capital gains and dividends received by UAE businesses from its qualifying shareholdings are exempt from corporate tax

Not applicable on qualifying intragroup transactions and restructurings

Corporate tax in UAE is calculated at 9% of the net profit shown in the company's financial statements. The 9 % corporate tax will be levied only if the taxable net profit exceeds 375,000 AED. In other words, the net profit up to 3,75,000 AED is taxed at 0%.

For example, If the net profit is 4,75,000 AED, the corporate tax will be 9,000 AED (4,75,000-3,75,000 X 9/100)

There is a lot to unfold on federal corporate tax as we walk towards D-day 'June,2023', which is miles away from now. Given the proposed implementation date, businesses have plenty of time to prepare for corporate tax.

Given that the corporate tax law is out, there is a lot to study and understand the complexity, one sure thing is that financial statements will now become even more critical for businesses. This is because the net profit on these statements becomes base to arrive at the corporate tax that a business is liable to pay.

The accuracy of the business data will define the correctness of financial statements, ensuring the right amount of corporate tax is determined.

At Amana, we have a precise understanding of the fact that each business differs in its goals, strategies and various other aspects. Hence, we customize the corporate tax solutions, per the client's requirements.

Through Amana Taxation and Accounting LLC corporate tax advisory, our corporate tax consultants in UAE also assist our valuable clients on issues such as Corporate Tax Registration, Filing CT Returns, etc., and explain the updated regulations from the Federal Tax Authority to prevent the payment of CT fines and penalties.

With our quality services in every aspect, we are highly recommended by clients for all business requirements, especially Corporate Tax Services in the UAE. For assistance or queries related to Corporate Tax, call Amana Taxation and Accounting LLC Today, or visit our office for more clarifications.