Taxation is an integral part of any financial system. Knowing the various types of taxes is crucial for both people and companies alike. For instance, in the United Arab Emirates (UAE) two of the most common forms of taxes include corporate and income tax. The UAE government has recently introduced new rules and regulations regarding the Corporate Business Tax for the UAE. The new rules and regulations on business taxation within the United Arab Emirates have created enough questions among those who reside in and around UAE. 

Income taxes are imposed on the earnings of individuals borne by self-employed or salaried people. In contrast corporate tax is imposed on the profits of corporations and is borne by companies that operate within the UAE. Understanding the difference between corporate and income tax is vital for companies and individuals to assure that they follow tax laws and regulations of the UAE. The article will delve into the role of corporate tax consultant in dubai and comprehensive information regarding the difference between Corporate and Income Taxes UAE.  

Individual vs Corporate Tax 

Individual Tax in UAE 

If it’s about personal tax within the United Arab Emirates or UAE there are two types of taxes that are applicable to people who reside in this country. There are two kinds of taxes that are available to residents of the UAE: 

Income tax: There could be no Personal Taxes for residents of the UAE. If you’re a citizen or resident it is not necessary to pay any Personal Tax within the UAE. Keep in mind that you can become tax-paying citizens of the country once you’ve obtained a residence visa. Interest, gift, wealth as well as inheritance and capital gains tax are exempt. In addition, there is no tax on pensions for residents of countries with residency permits from the United Arab Emirates. 

Corporate Tax in the UAE 

In December 2022, the UAE introduced a new corporate tax law that exempts certain companies and incomes from having to pay the mandatory corporate tax fee. The law is already in effect as of June 2023 and applies to individuals and businesses based on their earnings from selling products and services. The law on Business Taxation covers taxation on the earnings of businesses of UAE residents. This regulation applies to corporate entities and to 0% of those engaged in business or other activities within the UAE. The law is exempt for certain incomes. Here is a list of incomes exempt from this law 

• Profits from qualifying intra-group transactions 
• There will be no UAE withholding taxes on domestic and cross-border transactions. 
• Dividends earned by UAE businesses from their qualified shares, subject to many conditions. 
• Profits from group restructuring, subject to certain conditions 

The Ministry of Finance revealed the new policy of the new cabinet on qualified public Benefit entities. This new rule was created to ensure that organizations or companies that operate to benefit the public in general are not required to pay taxes. 

If foreign earnings can be taxed under UAE Corporate Tax The amount of tax imposed in the other country on UAE tax-paying income is deducted off your UAE Corporate Tax obligation. 

The United Arab Emirates has introduced the lowest corporate tax rate of 9 percent on income taxable. Businesses operating within the Free Trade Zone shall continue to enjoy 0% tax, subject to conditions, provided that they earn a specific income and meet certain requirements. In this instance, tax-deductible income is defined as income that is the amount of AED 375,000 *. 

The Law for this corporate tax applies to non-residents of the UAE. However, non-residents will be taxed on only income earned from an UAE Permanent Establishment (PE) and income that comes through the UAE (known under the term State Sourced Income). 

If the turnover of a natural person is greater than AED 1 million during an Gregorian calendar year tax-deductible income is taxed at the following rates: 

• 0% on the amount of Taxable Income that is not more than AED 375,000. 
• 9% of the portion of taxable income that is greater than AED 375,000. 

Corporate Tax vs Income Tax – Verdict 

How can a corporate Tax Consultant benefit you? 

Corporate tax consultant in Dubai provides customized tax advice for corporations to benefit you from corporate tax. Our team of experts will benefit you to acquire clarity regarding UAE corporate taxes. For more information about the differences between income tax and corporate tax in the UAE and the United Arab Emirates, schedule a no-cost consultation with one of the Flying colour team advisors. 

FAQs 

What is the distinction between income tax and corporate taxation in UAE?  

In UAE, the corporation tax is a tax imposed on the profits of corporations and income tax is one on the earnings of individuals. 

Is both the tax on corporate income as well as tax for profits lawful in the UAE?  

The answer is no, UAE does not currently charge corporate tax to companies that operate inside its boundaries. Tax on income is not applicable to expatriates or residents who work in the UAE. 

How can companies in UAE be taxed even though there isn’t any corporate tax?  

Businesses in the UAE are subject to different kinds of taxes in addition to corporate tax, for example VAT (Value added Tax) and customs taxes. In addition, certain industries might be subject to certain taxes or charges. 

Do you know of any special exemptions or rules regarding corporate tax or income tax in the UAE?  

As of today, there aren’t any specific exemptions or other special provisions related to corporate tax in the UAE as it isn’t applicable. Taxes on income expatriates living in designated free zones or areas could be eligible to specific exemptions or reductions in the tax rate.