Corporate Tax in the UAE
The UAE has long been known for its tax-friendly environment, but with the introduction of corporate tax starting June 2023, businesses need to stay informed and compliant. While this may seem like a big shift, the new corporate tax regime is designed to align the UAE with international tax standards and foster long-term economic growth.
At Corpline, we specialize in helping businesses navigate the evolving tax landscape. In this post, we’ll break down what you need to know about corporate tax and how it could impact your business.
1. What is Corporate Tax?
Corporate tax is a form of direct tax levied on the profits of a corporation or business. While many countries have long had corporate tax systems in place, this is a new development for the UAE, aimed at diversifying revenue sources and enhancing the country’s global reputation as a transparent business hub.
2. Who is Subject to Corporate Tax?
The UAE’s corporate tax applies to all businesses operating within the country, including mainland companies and free zone entities that engage in business activities within the UAE. However, it’s important to note that free zone businesses may still benefit from tax incentives, depending on the nature of their activities and compliance with the regulations.
Exemptions:
• Companies involved in the extraction of natural resources are exempt from corporate tax as they will continue to be taxed at the emirate level.
• Certain small businesses, charities, and government entities may also be exempt or eligible for special treatment.
3. Corporate Tax Rates
The UAE has introduced a competitive tax rate to ensure the business-friendly environment remains attractive:
• 0% on profits up to AED 375,000 (to support startups and small businesses)
• 9% on profits exceeding AED 375,000
• A different rate for large multinational corporations that meet specific criteria under the OECD’s Base Erosion and Profit Shifting (BEPS) guidelines.
This structure ensures that small and medium-sized enterprises (SMEs) can continue to thrive, while larger corporations contribute fairly to the economy.
4. Impact on Free Zone Businesses
If your business operates in a UAE free zone, you may still benefit from corporate tax exemptions provided you meet the necessary compliance requirements. However, free zone companies that conduct business with the mainland may be subject to the 9% corporate tax on mainland-sourced profits.
Understanding your specific obligations is crucial to ensure that your business remains compliant while maximizing available benefits.
5. What Should Businesses Do Now?
Even if corporate tax won’t significantly impact your bottom line, it’s essential to begin preparing now. Here are a few steps to take:
• Evaluate your business structure: Ensure your business structure is optimized to meet tax requirements and minimize liability.
• Keep accurate financial records: Corporate tax requires a clear understanding of your profits and losses. Investing in proper accounting systems is key.
• Consult with tax professionals: The introduction of corporate tax means that businesses will need expert advice on compliance and tax planning.
How Corpline Can Assist You
At Corpline, we understand that navigating new tax laws can be daunting. Our team of experienced tax consultants is here to help you understand your obligations, stay compliant, and even plan for future tax liabilities. Whether you’re a startup, SME, or a large corporation, we provide tailored solutions that fit your business needs.
Stay Ahead with Corpline
Corporate tax is a new frontier for businesses in the UAE, but with the right guidance, you can navigate it with ease. At Corpline, we ensure that your business is not only compliant but also optimized for long-term growth.
Ready to get started? Visit Corpline.ae to book a consultation today and secure your company’s future in the UAE’s evolving tax landscape.