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Corporate Tax (FAQ)

Have Questions About Corporate Tax  in the United Arab Emirates? Get Your Answers Here.

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FAQS

What is Corporate Tax

Corporate Tax is a direct tax levied on the net income or profit of corporations and businesses. It may also be referred to as "Corporate Income Tax" or "Business Profits Tax" in certain areas.

Who is subject to UAE Corporate Tax

UAE Corporate Tax is applicable to: Juridical persons incorporated in the UAE. Foreign juridical persons that are managed and controlled within the UAE. Foreign juridical persons operating through a Permanent Establishment or with a taxable presence in the UAE. Natural persons conducting business activities in the UAE.

How can businesses get ready for UAE Corporate Tax?

Examine the Corporate Tax Law and relevant information from the Ministry of Finance and the Federal Tax Authority. Identify whether and when your business will be liable for Corporate Tax. Familiarize yourself with your business's registration, filing, and record-keeping obligations as per the law. Stay updated on any changes and guidance provided.

What is the Corporate Tax Period in the UAE?

The Tax Period refers to the financial year designated for preparing financial statements, usually aligning with the Gregorian calendar year unless another 12-month period is chosen.

What are the corporate tax rates in the UAE?

For natural and juridical persons: 0% on taxable income up to AED 375,000 9% on taxable income exceeding AED 375,000 For qualifying free zone entities: 0% on qualifying income 9% on non-qualifying income

Does the 0% corporate tax rate apply to every business?

Yes, the 0% rate applies to the income of each taxable person up to AED 375,000, regardless of how many businesses they operate. However, for tax groups, the threshold is shared among the members. Attempts to artificially divide businesses to exploit the threshold multiple times will result in penalties.

Will natural persons be liable for UAE Corporate Tax?

Yes, natural persons will be liable for UAE Corporate Tax if their annual turnover exceeds AED 1 million from a 'Business' or 'Business Activity' in the UAE.

What qualifies as a 'Business or Business Activity' conducted by a natural person that is taxable?

A natural person is liable for UAE Corporate Tax if they engage in any Business or Business Activity that generates an annual turnover exceeding AED 1 million. This does not include income from: Employment, Personal investments, Real estate investments

Is employment income subject to UAE Corporate Tax?

No, salaries and wages from employment contracts, including allowances and bonuses, are not subject to UAE Corporate Tax.

Are incomes from personal investments subject to UAE Corporate Tax?

No, personal investment income and real estate investment income earned in an individual capacity are not subject to UAE Corporate Tax. Personal investment income includes earnings from investments made personally, such as interest or dividends, and does not include income from commercial businesses or activities that require a UAE license. Real estate investment income comes from activities related to land or property in the UAE, as long as these activities do not require a UAE license.

Will small businesses receive any UAE Corporate Tax relief?

Yes, businesses with revenues of AED 3 million or less can opt for 'Small Business Relief' for tax periods ending on or before December 31, 2026. This allows them to be regarded as having no taxable income. An election must be made in the Corporate Tax Return for the applicable tax period.

What is "Small Business Relief"?

Small Business Relief enables qualifying businesses to bypass the need for calculating and paying Corporate Tax, as well as the associated reporting obligations. Businesses with revenues of AED 3 million or less in the current and previous tax periods can choose to be regarded as having no taxable income. However, if their revenue exceeds AED 3 million in any tax period, they will no longer qualify for this relief.

What is the Free Zone Corporate Tax regime?

The Free Zone Corporate Tax regime offers a 0% Corporate Tax rate on income derived from qualifying activities and transactions for Free Zone companies and branches that meet certain criteria.

How are Qualifying Free Zone Persons taxed under the UAE Corporate Tax framework?

They are taxed at 0% on income from Qualifying Activities and transactions with other Free Zone Persons, unless the income comes from Excluded Activities. Income generated from a Permanent Establishment in mainland UAE or abroad is subject to a 9% tax, with provisions in place to prevent double taxation.

When do the benefits of the Free Zone Corporate Tax regime expire?

The benefits will cease at the conclusion of the tax incentive period outlined in the Free Zone legislation, unless extended by a Cabinet Decision.

Will Value Added Tax paid be deductible for UAE Corporate Tax?

Only irrecoverable input VAT may be deductible. Recoverable VAT amounts are not deductible

Will the UAE Corporate Tax regime permit the use of prior year tax losses to offset taxable income?

Yes, tax losses can be applied against taxable income in future periods, up to 75% of the taxable income for each of those periods. Any unused tax losses can be carried forward indefinitely.

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