UAE’s Corporate Tax, 9% corporate tax in UAE from next financial year; Who is exempt? – Nine % corporate tax from next financial year in uae

Abu Dhabi: The Ministry of Finance said that corporate tax will be collected from companies in the UAE from the next financial year. It has been decided to levy nine percent corporate tax on companies earning profits above Dh375,000. The decision is made in accordance with Federal Law No. Forty Seven of 2022 on Taxation of Corporations and Businesses. The Ministry of Finance said that the decision to implement the integrated tax system is to increase the UAE’s global economic competitiveness and to help the international financial system.

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From 1st June of the year in which the decision was made

Corporate tax will apply to businesses in the UAE from fiscal years beginning on or after June 1, 2023. The higher profit limit of 375,000 dirhams has been set to support small and medium enterprises and start-ups and to make the economy more competitive, officials said. The limit of taxable income is not determined on the basis of the total turnover of the business. On the other hand, the authorities also clarified that the tax is payable only if the profit of the company reaches 3.75 lakh dirhams.

Tax not applicable, to whom?

Corporate tax does not apply to individual salaries or income from employment. Also, personal income from bank deposits or savings programs and real estate investments made by individuals in their personal capacity are also exempt from taxation. The Ministry of Finance pointed out that almost all countries impose corporate taxes on businesses to diversify government revenues.

Free zone companies have been excluded

According to the new Federal Tax Law, free zone companies in the UAE operating in compliance with the UAE Corporate Tax Law are exempted from corporate tax. Companies involved in the extraction of natural resources are also exempted. However, they will continue to pay the current emirate tax. Government bodies, pension funds, investment funds and public benefit organizations are also exempted from the purview of corporate tax.

Tax records must be kept for seven years

Corporate tax applies to residents, non-resident individuals and free zone individuals who earn more than Dh375,000 per annum. If expatriates have a permanent establishment in the UAE, income derived from the sale of goods and provision of services in the country is also taxed at nine percent. Officials also said that firms must retain income-related and tax-related records for seven years after the end of the tax period. Under the new law, annual corporate tax returns are required to be submitted by all taxable persons within nine months of the end of the tax period. Group companies in the country can form a tax group, file a single tax return and pay tax at one time, said those working in the sector.

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