Practical Guide to the UAE Corporate  Tax

The implementation of the federal Corporate Tax (“CT”) regime in the UAE will have a significant impact on UAE businesses.

We have outlined below those key aspects from a practical perspective that we believe will play a vital role in assessing, analyzing, and implementing the CT provisions in relation to their businesses.

FIGURE OUT THE APPLICABILITY OF UAE CT

UAE-incorporated entities except those engaged in the extraction of natural resources, but including:

• Free zones

• Foreign entities with Permanent establishment and place of management in the UAE

DETERMINE THE TAX PERIOD

As the effective date is 1 June 2023, the tax periods will be as follows:

• 1 July 2023 to 30 June 2024

• 1 January 2024 to 31 December 2024

• 1 April 2024 to 31 March 2025

CHECK OUT THE CT RATE

Free Zone - 0% - subject to conditions

Others - Taxable income up to AED 375,000 - 0%

Above AED 375,000 - 9% or higher rate for large multinationals

DETERMINE TAX PROVISION

-Accounting profit as per the IFRS or alternative financial reporting standards is the base

-Treatment of unrealized gains or losses

-Adjustments for exempt income and expense deductions

-Set off brought forward tax loss

-Net taxable income taxed at the applicable CT rate reduced by foreign tax credit and withholding tax

FREE ZONES

• Maintain adequate substance

• Comply with all regulatory requirements

• No business with the mainland (excluding passive income) except through a mainland branch

• Have audited financial statements

INCREASED FOCUS ON RELATED PARTY TRANSACTIONS

• Transactions with related parties to be at Arm’s Length Price (“ALP”)

• ALP to be supported by internationally accepted Transfer Pricing methods

• Prepare and maintain both Local file and Master file

EXAMINE BENEFITS OF TAX GROUP

To form a Tax group:

• Parent company holding to be at least 95%

• None of the entities in the group are exempt or free zone with a tax holiday

• All group members have same financial year.

Comparative analysis of tax cost for individual entities vis-à-vis tax group

COMPLY WITH TAX REGISTRATION AND FILINGS

• Register and obtain a Tax Registration Number

• Prepare and file CT return and pay taxes within 9 months from the end of the tax period

• File Related party disclosure form