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13 Feb

New, Corporate Income Tax in the United Arab Emirates

The Federal Tax Authority (FTA) of United Arab Emirates has announced on January 31st, 2022 the new federal Corporate Income Tax that will effectively start on or after June 1st, 2023.

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New, Corporate Income Tax in the United Arab Emirates

The Federal Tax Authority (FTA) of United Arab Emirates has announced on January 31st, 2022 the new federal Corporate Income Tax that will effectively start on or after June 1st, 2023. It’s a turning point time in Untied Arab Emirate’s rich history 50 years of successful track record, integrating with global trade and best practices, coming out with an effective tax framework, while minimizing compliance burden on companies  and framing them more transparent.

While the law has not yet been issued, the Federal Tax Authority (FTA) has publicly announced the key principle and policy choices for the new regime which states:

  • Companies with fiscal years starting on July 1st 2023 and ending on June 30th 2024, will become subject to CT from July 1st 202.
  • For a business that begins its annual financial year on January 1st 2023 and ends on December 31st 2023, the UAE CT will apply from January 1st 2024 (which is the first fiscal year the business will begin on or after 1 June 1st 2023).

Further information on UAE CT regime will be issued in the middle of the year.

The CT will be applied to everyone (legal persons and individuals) carrying out company activities in the United Arab Emirates (UAE), under a commercial license, including organizations operating in the banking sector. Except for the following:

  • Organizations engaging in the extraction of natural resources.
  • Free zone organizations, which will pursue to benefit from tax incentives offered to them at the time, as long as all regulatory requirements are complied with. However, the Federal Tax Authority (FTA) will be releasing more information about the query of registration and filing a CT return.

The corporate tax will be applied to the net profit of a company which is the amount reported in the Financial Statements prepared in accordance with international accounting standards. There will be a progressive tax rate that will be applicable on the following:

  • 0% tax for companies with income profit UP TO AED 375,000. That is to support small companies and startups.
  • 9% tax for companies with income profit MORE THAN AED 375,000
  • According to pillar two of the OECD’s base erosion and profit shifting project, this rate might be different for large multinational companies that meet particular criteria.

The objective for this aim is to cement United Arab Emirate’s Position as a world-leading hub for businesses & investment. Meeting international standards for tax transparency and preventing harmful tax practices. And accelerating the United Arab Emirate's development & transformation to achieve strategic objectives.

Key features that the Federal Tax Authority (FTA) indicated:

  • CT is not applicable to an individual’s income from employment, real estate, investment in shares, or other personal income not relevant to United Arab Emirates trade or business.
  • No CT would be applied for foreign investors that don't carry out any form of business in the United Arab Emirates.
  • No withholding tax would be applied on cross-border and domestic payments.
  • No CT would apply on capital gains and dividends received by a UAE business from its qualifying shareholdings.
  • No CT will apply on qualifying intra-group transactions & restructurings.
  • Foreign tax would be allowed to be credited against United Arab Emirates corporate tax payable.
  • Generous loss transfer and utilization rules would be available to business.

Tax rates is one of the most competitive and low-priced rates in the world, with built-in great flexibility and as obscure as it may sound, this Is actually a great move that will benefit big businesses, tax data will help out them to demonstrate their financial performance and will get them to start financing. Full fine print details yet to be announced by the Federal Tax Authority. 

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