UAE: Introduction of Corporate Tax
UAE: Introduction of Corporate Tax
Corporate Tax (“CT”) Rates are indicated in the below table:
| SR.NO |
Taxable Income / Category |
Corporate Tax Rate (%) |
|
1 |
Taxable income up to AED 375,000. |
0% |
|
2 |
Taxable income over and above AED 375,000. |
9% |
|
3 |
Large multinationals (having consolidated global revenue exceeding Euro 750 million equivalent to AED 3.15 billion) that meet specific criteria set with reference to “Pillar Two” of the OECD Base Erosion and Profit Shifting project. |
Different tax rate |
- Coverage:
- All UAE businesses and commercial activities alike.
- All activities undertaken by a legal entity will be deemed “business activities”.
- Activities carried out under a freelance license/ permit.
- Individual persons who have a commercial license and deriving business income.
- Exclusions:
- Businesses and commercial activities dealing with the extraction of natural resources.
- Interest and other income earned by an individual from bank deposits or saving schemes.
- Salary or employment income earned by individual persons.
- Dividend, Capital Gains and other income earned from owning shares or other securities in their personal capacity or by UAE businesses from their qualifying shareholdings.
- Key Areas
- Tax Group – The CT regime provides UAE groups of companies the option to form a tax group as a single taxable person and thereby, only single tax return will be required for the entire group.
- Losses – The CT regime will allow businesses to use losses incurred (as from UAE Corporate Tax effective date) to offset taxable income in subsequent financial periods. Further, Tax losses from one group company may be used to offset taxable income of another group company.
- Withholding Tax – It is clarified that Withholding Tax will not be applicable on domestic and cross-border payments of any nature under the CT regime.
Key Takeaways
The introduction of the UAE CT regime will have an impact on the tax and compliance costs of most UAE businesses. As such, businesses will require clear identification of the tax implications and should change their corporate structure, operating model(s), finance / tax function, reporting systems, legal agreements, and TP policies accordingly.
