Corporate Tax Dubai is a new tax law introduced in UAE. The free-zone companies in UAE are known to be enjoying 100% tax exemption from customs duty charges, they have simplified procedure for setting up their businesses and many more advantages. Dubai has the lowest rate of Corporate Tax, which is just 9%, in case they must pay it at all. There are many free-zones in Dubai and companies in more than 45 free-zones have been enjoying zero tax rates and full foreign ownership.  

What are the benefits and incentives?  

Corporate Tax UAE offers 0% corporate tax rate to the free-zone companies. 

According to the Ministry of Finance, Qualifying Free-Zone Persons (QFZP) can enjoy a tax-free zone if they are following certain terms and conditions.  

• They can benefit from a separate labor law and 100% repatriation of capital and profits.  
• They have easy access to regional and global markets.  
• 100% exemption from all the corporate and income taxes.  
• The preferential regime will apply to FZ companies if the following conditions are met. 
• There are adequate assets, employees and operating expenditure.    
• The income is derived from relevant transactions that are not from non-qualifying businesses or are not excluded.  
• They do not elect to be subject to corporate tax. 
• They comply with transfer pricing rules. 
• Audited financial statements are prepared and maintained.  

Are the tax provisions different?  

The tax provisions that are applied to mainland are equally applied to the FZ companies. There ae some differences in the corporate tax that are applied to FZ companies, the conditions need to be followed if the free-zone companies require a 0% tax rate. For example, they maintain audited financial reports, whereas the mainland companies need to maintain their audited financial statements if their revenue exceeds AED 50 million. The QFZP is not entitled to a 0% tax rate on its first AED 375,000.  

UAE in Comparison to Other Countries. 

All the other companies globally have a higher tax rate than Dubai, which is the lowest – 9%. If we look the countries in Europe, Portugal has the highest rate that reached 31.5%, after that its Germany which is 29.94%. Hungary was the lowest which was 9%.  

The UAE free-zone corporate tax has made it easy for the companies registered for corporate tax. It helps safeguard us from any harmful tax practices. Special economic zones (SEZs) are typically established by other governments to support industries or to improve a particular geographic area; the concessions granted to these zones are contingent upon the circumstances of each case. In other nations, most SEZ are granted a fixed period of tax holidays (say 10 years) as a fiscal incentive generally during their initial set-up years. These incentives may not always be directly related to the kinds of transactions that SEZ companies engage in, and they may be available to a wide range of businesses if they carry out qualifying operations in accordance with SEZ laws. However, corporate tax relief in the United Arab Emirates is “uniquely conditionally linked with the type of revenue and business activities conducted by such free zone, which could be complicated for business to comply and monitor” due to the wide range of different FZ legislation and practices. 

Conclusion:  

Corporate Tax is benefiting for Free-Zone companies in many ways which are explained above. It important that these companies properly follow the terms and conditions if they want to enjoy these benefits. It is easier if these companies hire Corporate Tax consultants in Dubai, as they are aware of all the changes in corporate tax. ebs Chartered Accountants are one of the leading firms in Dubai for this purpose, they are a team of professionals available to take care of your corporate tax needs. If companies want to get help from any online site, uaetaxgpt.ae is the most reliable source of information for tax purposes in Dubai.  

FAQs  

Is there a corporate tax in the UAE? 

The Ministry of Finance (MoF) of UAE announced on 31st January 2022 that they will implement a new federal corporate tax system effective from 1st July 2023 or 1st January 2024. The corporate tax implementation date depends on the financial year followed by the business. UAE businesses must register under corporate tax whenever the MoF announces to do so. 

How to calculate corporate tax in UAE? 

Corporate tax is calculated on the company’s taxable income or net income. The taxable income is also known as net earnings or net profits. You must calculate income generated from all the revenue sources. Further, operating expenses, interest, depreciation, amortization, etc., must be deducted from total income to arrive at the net income. 

Must every business in UAE pay corporate tax? 

Small businesses with taxable income less than AED 375,000 don’t have to pay corporate tax.