Corporate tax is a direct tax applied to the net income or profit of businesses operating in the UAE. The UAE introduced corporate tax to achieve several goals:

• Solidify the UAE’s position as a global hub for business and investment.
• Accelerate the country’s development and achieve strategic objectives.
• Demonstrate the UAE’s commitment to international tax transparency standards and prevent harmful tax practices.

The UAE government imposes corporate tax on all businesses and individuals with a valid UAE license who conduct commercial activities. This applies even to free zone businesses, although they can continue to benefit from existing corporate tax incentives as long as they follow the regulations and operate within the UAE mainland. Foreign entities and individuals only need to pay corporate tax if they are actively conducting business in the UAE on an ongoing or regular basis. Activities such as banking operations, real estate management, construction, development, agency services, and brokerage are also subject to corporate tax.

Businesses engaged in the extraction of natural resources will remain exempt from Corporate Tax, as they will continue to be subject to the existing Emirate level corporate taxation. Dividends and capital gains earned by a UAE business from qualifying shareholdings will also be exempt from CT. Additionally, qualifying intra-group transactions and reorganizations will not be subject to Corporate Tax, provided that all necessary conditions are met.

• An individual’s salary and other employment income, regardless of whether it is received from the public or private sector.
• Interest and other income earned by individuals from bank deposits or saving schemes.
• Income earned by foreign investors from dividends, capital gains, interest, royalties, and other investment returns.
• Real estate investments made by individuals in their personal capacity.
• Dividends, capital gains, and other income earned by individuals from owning shares or other securities in their personal capacity.

• 0 percent for taxable income up to AED 375,000.
• 9 percent for taxable income above AED 375,000.
• A different tax rate for large multinationals that meet specific criteria set with reference to ‘Pillar two’ of the OECD Base Erosion and Profit Shifting Project, which has not yet been specified.

The Federal Tax Authority (FTA) is responsible for the administration, collection, and enforcement of the Corporate Tax. For more information on corporate tax, as well as guidance on how to register and file returns, please refer to the FTA’s website.

• For profits up to AED 375,000, no corporate tax is applied.
• If profits exceed AED 375,000, the amount exceeding this threshold is subject to a 9% corporate tax rate.
• For instance, if profits amount to AED 400,000, the taxable amount is AED 25,000 (AED 400,000 – AED 375,000). At a 9% tax rate, the corporate tax for the financial year would be AED 2,250.

In summary, profits below or up to AED 375,000 are exempt from the 9% corporate tax in the UAE.

In the UAE, a Taxable Person must file a Corporate Tax return within 9 months from the end of each tax period. This deadline applies to paying any Corporate Tax owed for the respective Tax Period.

Failure to comply with Corporate Tax regulations established by the Ministry of Finance and the Federal Tax Authority may result in fines and penalties.

• Businesses involved in the extraction of natural resources, as regulated by Emirate-based corporate taxation laws.
• Dividends and capital gains derived from UAE businesses by qualifying shareholders.
• Intra-group transactions and reorganizations, provided that specific conditions are fulfilled.
• Earnings such as salaries and similar income, whether from the public or private sector.
• Interest earned from bank deposits or saving schemes.
• Income generated from dividends, capital gains, interest, royalties, and other investment returns by foreign investors.

Corporate Tax management need not be a source of concern. With Square International Auditing & Advisory as your partner, you can streamline your corporate tax responsibilities with confidence. Whether you require support with Corporate Tax Registration,Corporate Tax Advisory,Corporate Tax Assessment,Corporate Tax Return Filing, our team is prepared to assist your business at every stage. Reach out us today to learn more about our Corporate Tax services and discover how we can help your business excel in corporate tax compliance and optimization in the UAE.