UAE: CORPORATE TAX INTRODUCTION

Corporate Tax is an example of direct tax. It is applicable on corporation profit or net income. Also known as “Corporate Income Tax” or “Business Profits Tax”

CORPORATE TAX IS APPLICABLE ON WHOLE UAE

UAE Subject to Corporate Tax.

The United Arab Emirates (UAE) includes seven emirates such as-

• Abu Dhabi
• Ajman
• Dubai
• Fujairah
• Ras AI Khaimah
• Sharjah
• Umm AI Quwain

CORPORATE TAX APPLICABILITY IN UAE

Corporate Taxation is applicable for

Resident Persons (natural persons and juridical persons)

Non-Resident Juridical Persons; and

Any other person as may be prescribed by the Cabinet.

Note: – Cabinet decision is pending for the clarification of resident natural persons for the scope of UAE Corporate Tax.

Juridical Resident Persons in UAE

A company or juridical person

(i) Incorporated/ established/ recognized in the UAE, including Free Zone Person.

(ii) Incorporated in a foreign jurisdiction but central management in the UAE i.e., controlled and managed in UAE.

A foreign company or juridical person controlled and managed in UAE

On the basis of

• Specific facts and circumstances.
• key factors that key management and commercial decisions related to strategic and policy matters necessary for the conduct of the company’s business are regularly and primarily made in the UAE.

Non-Resident Juridical Persons in UAE

• The Non-Resident Juridical Persons are entities neither incorporated in the UAE nor has its central management within the UAE.

Non-Resident Juridical Persons subject to corporate tax in the UAE

Those Non-Resident Juridical Persons who-

• Possesses a Permanent Establishment in the UAE; or
• Derives State Sourced Income.
• Non-Resident Juridical Persons have relations in the UAE through earning income from immovable property in the UAE.

Permanent Establishment (PE) in the UAE

A PE in the UAE is established under certain conditions, such as:

Non-resident Entity has at least one ‘fixed or permanent place’ for conducting its business operations in the UAE also known as Physical Presence.

Non-Resident Entity authorized resident person in the UAE to conduct business on behalf of a non-resident entity also known as Authority to Operate.

1. Free Zone in the UAE

A free Zone is an assigned and described geographic area within the Emirates that is specified in a decision issued by the Cabinet at the suggestion of the Minister.

2. Free Zone Person in the UAE

A juridical person incorporated, established, or otherwise registered in a Free Zone, also a branch of a Non-Resident Person registered in a Free Zone.

3. Tax Registration Number for Corporate Tax in the UAE

A unique number is issued by the Authority to each Person who is registered for Corporate Tax purposes in the Emirates.

4. Exempt Income is subject to Corporate Tax in the UAE

The Taxable Income shall not take into account the following income and related expenditures.

• Dividends and other profit distributions received from a juridical person who is a Resident Person.
• Dividends and other profit distributions received from a Participating Interest in a foreign juridical person.
• Any other income from a Participating Interest
• Income of a Foreign Permanent Establishment
• Income derived by a Non-Resident Person from operating aircraft or ships in international transportation.

5. Corporate Tax Rates in the UAE

Imposed on the Taxable Income

9% (nine percent) on Taxable Income that exceeds the amount specified in a decision issued by the Cabinet by the suggestion of the Minister.

Imposed on the Qualifying Free Zone Person

9% (nine percent) on Taxable Income that is not Qualifying Income.

6. Tax Period for Corporate Tax in the UAE

A Taxable Person’s Tax Period is the Financial Year or part thereof for which a Tax Return is required to be filed. The Financial Year of a Taxable Person shall be the Gregorian calendar year or the (12) twelve-month period for which the Taxable Person prepares financial statements.

Disclaimer:

The information provided in this content is for general informational purposes only. You should always seek the advice of an expert before making any decisions based on the information provided. We do not warrant or guarantee the accuracy, completeness, or usefulness of the information provided. Any reliance you place on such information is strictly at your own risk. We are not responsible for any damages, losses, or expenses related to the use of this content.