Corporate tax in Dubai, UAE

Corporate tax in Dubai, UAE - Makebiz

Until recently, the UAE was considered a zero tax rate jurisdiction, but as a member of the OECD it has committed to implementing a global minimum effective rate on corporate net income. As a result, the corporate tax was announced on January 31, 2022 and the law came into effect on June 1, 2023.

The rate is 9% on profits exceeding UAE AED 375,000 per annum. Accordingly, for income less than this amount, the rate will be as before — 0%. The new rules apply to all types of businesses: located on the main land or in the FEZ, under the management of local and foreign citizens regardless of the type of activity.

It is worth noting the concept of qualified companies in freezones, for which, despite the new law, the rate remains 0%. This status is given to companies that generate profits in a qualified line of business with a high level of assets and an adequate amount of operating expenses. The wording is not yet supported by specific information on amounts, so it may be difficult to assess against these criteria.

Certain periods apply for filing reports and paying fees. In most cases, the filing deadline is 9 months. Thus, for businesses with a fiscal year beginning on June 1, the deadline is February 28 of the following year. In the case of one starting on January 1, the deadline is September 30 of the following year.

The introduction of the levy reinforces the UAE’s importance as a global center for business and investment. This is primarily due to the fact that the attractive rate of 9% is set based on international experience and allows the UAE to maintain a simplified taxation system to create a supportive environment for business. The tax also contributes to increasing transparency of transactions and responsibility of companies. Such a step will also accelerate the pace of economic development and the achievement of strategic goals.

The introduction of corporate taxation obliges firms to engage in accounting and filing of returns with the UAE Federal Tax Authority, regardless of whether the company earns income or not. Smooth timelines promote cost savings and efficient time allocation, and allow for uniform reporting for groups of companies with consolidation of the amount of fees paid.

Let us list the main steps involved in the new legislation:

1. Obtaining a registration number (TRN) from the FTA.

2. Maintaining detailed records of transactions and documents in accordance with UAE law.

3. Preparing tax returns calculating the firm’s taxable income, deductions and exemptions.

4. Filing returns through EmaraTax platform by uploading the completed form with all required documents, meeting the statutory deadlines. Financial records of the firm with calculations of taxable income and bank statements will be required.

5. Payment of the prescribed amount.

6. Be prepared for additional requests from the FTA to verify the information provided.

Errors that may result in additional verifications or penalties ranging from AED 5000 to 20000:

  • Incomplete documentation: documents submitted must support the information claimed.
  • Failure to meet deadlines: submit all required reports on time.
  • Incorrect calculation of taxable income and tax amount.
  • Errors in the form: carefully complete and verify the tax return.

The introduction of corporate tax in the UAE marks a new era for business and investment in the country. The competitive rate, modern taxation system and favorable business environment help attract international companies and stimulate economic growth. Effective implementation of this levy will strengthen business loyalty and cement Emirates’ commitment to global tax standards.

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