As the United Arab Emirates (UAE) undergoes significant tax reform, businesses operating within its borders must adapt to new corporate tax regulations. Dubai Corporate Tax is designed to promote economic development and growth and ensure compliance. In this blog we have prepared this comprehensive guide on UAE corporate tax regulations so businesses can successfully navigate them and comply with changes effectively. 

Overview of Corporate Tax in the UAE 

Corporate Tax in the UAE is a direct tax levied on corporations and other entities from their business activities and designed to incorporate best practices internationally while minimizing compliance burden for businesses. For financial years commencing on or after June 1, 2023, standard corporate income tax rate in UAE stands at 9%. A Corporate Tax accountant in Dubai can help you better understand the corporate tax.  

Who is subject to Corporate Tax in the UAE? 

The UAE Corporate Tax Law applies to an expansive list of businesses and entities, including: 

• Businesses operating under commercial license in UAE: Both local and foreign entities conducting activities within mainland UAE under commercial license are liable to corporate tax. 

• Businesses located within free zones: That don’t meet qualifying income criteria may be subject to free zone corporate tax. 

• Foreign Entities and Individuals: Foreign entities and individuals conducting business activities in the UAE may be subject to corporate tax if they maintain physical presence within its boundaries. 

• Banking Operations: Banks and other financial institutions operating in the UAE are subject to corporate tax. 

• Real Estate/Construction Businesses: Companies engaged in real estate management, construction, development or brokerage activities also fall under this tax levy. 

Small Business Tax Relief  

To encourage small business growth, the UAE Corporate Tax framework offers “small business tax relief”, which entitles qualifying small firms to qualify for a 0% tax rate by meeting certain criteria.  

Key Features of UAE Corporate Tax Compliance 

This relief also permits qualifying firms to avoid registration costs for their tax registration requirements with the government. 

• Tax Registration: All taxable entities must register with the Federal Tax Authority (FTA) within 30 days of becoming eligible to pay corporate tax. 

• Filing Corporate Tax Return with FTA: Taxable entities must meet their corporate tax liabilities within specified timelines, while companies are required to maintain records for at least five years to support their corporate tax returns. A variety of documents are also needed to register their corporate taxes.  

• Documents needed for corporate tax registration include: 

1. An Emirates ID of an authorized signatory.  
2. Proof of Authorization/Mutual Obligation Authorization for them as signatory (POA/MOA). 
3. Trade license or business license. 
4. Valid passport. 
5. Accurate details about shareholding percentage. 

Filing Corporate Tax Submission 

Entities should know their tax period, filing dates for tax returns and the necessity of keeping financial records before beginning their corporate tax submission. 

Key Features of UAE Corporate Tax Law 

Calculation of Taxable Income: The Dubai Department of Finance (DOF) uses rules and regulations approved by it in calculating taxable income according to CT law provisions and related decisions. 

Tax Filings and Payments: The DOF will outline a timeline and requirements for filing tax declarations, along with documents which should be provided as submissions. 

1. Financial statements should be audited. 
2. Any submission that does not provide all the pertinent details will be rejected. 
3. Taxpayers have up to 30 days from when they become aware that any unpaid or underpaid tax has accrued to declare any excess or shortfall voluntarily. 

Tax Audit: While the law outlines duties and procedures pertaining to tax audits, taxpayers should generally be informed at least five days in advance and the results must be delivered back to DOF within ten days from when an audit ends. 

Conclusion 

The UAE Corporate Tax regime aims to maximize compliance while minimizing burden for businesses, and by understanding key features of regulations businesses can more efficiently plan and prepare for fiscal years ahead. This comprehensive guide offers an overview of UAE Corporate Tax regulations so they may navigate changes efficiently while adhering to compliance requirements. Dubai corporate tax consultants can help you with all your requirements and once these requirements are fulfilled successfully your business is eligible for a corporate tax certificate that will ensure that your business follows all the rules and regulations of corporate tax. Choose the best consultants like ebs Chartered Accountants if you desire to have a smooth experience. 

FAQs  

Who is Subjected to Corporate Tax in the UAE? 

Businesses operating in the UAE, including both local and foreign entities, are subject to corporate tax if they conduct business activities under a commercial license. This includes free zone businesses that do not meet the qualifying income criteria. 

What are the Tax Rates in the UAE? 

The UAE has a standard corporate tax rate of 9% on taxable income above AED 375,000. Small businesses with profits below this threshold are exempt from corporate tax, with a zero percent tax rate. 

What are the Key Exemptions in the UAE Corporate Tax Law? 

The UAE corporate tax law provides exemptions for certain entities, including government entities, public benefit entities, and individuals earning income from bank deposits and employment. Additionally, businesses involved in the extraction of natural resources and certain free zone entities are also exempt from corporate tax.