UAE corporate tax 2023
  • February 27, 2023

In UAE, the implementation of Value Added Tax (VAT) in January 2018, followed by the execution of Economic Substance Rules (ESR) and Country-by-Country Reporting (CbCR) regulations in 2019, has pushed several tax reforms to align with international market standards and expand its revenue. The introduction of the corporate Tax is part of the UAE's efforts to diversify its sources of income and contribute to the country's development and growth.


In the UAE, the Federal Decree-Law No. 47 of 2022, the Taxation of Corporations and Businesses, introduced a new corporate tax regime which will be effective for financial years starting June 1, 2023Under the new tax regime, businesses exceeding AED 375,000 should pay a standard tax rate of 9% on the profits in the UAE, marking a significant shift in the country's tax policy.


Who is entitled to pay corporate Tax in UAE?

The new corporate tax law applies to the following:

Ø Businesses incorporated in the UAE under commercial licence

Ø Individuals (foreign or resident) conducting business in the country 

Ø Foreign companies or individuals operating or managing a permanent establishment in the UAE.

Ø Businesses in real estate management, insurance, banking, construction, development, agency, and brokerage firms.


Features of Corporate Tax Regime

1. Tax rates

The UAE corporate tax regime introduces a tier system with rates as follows:

1. Businesses and individuals with annual taxable profits less than AED 375,000 shall be subject to a 0% tax rate.

2. Businesses and individuals with taxable profits above AED 375,000 annually shall be subject to a 9% rate.

3. All multinational enterprises (MNEs) that meet specific criteria under the scope of Pillar 2 (OECD Base Erosion and Profit Shifting Project) shall be subject to different rates.


2. Exempt from Corporate Tax

Certain businesses and entities are exempt from the corporate Tax that, including:

1. Government entities and government-controlled organisations

2. Extraction business (subject to approval by the Ministry of Finance)

3. Wholly-owned and controlled subsidiaries of government entities. 

4. Public benefit organisations or charities

5. Investment funds


3. Resident Person and Non-Resident Person

The tax rate depends on their tax residency status in the corporate tax regime. A "resident person" is an organisation incorporated or managed under the laws of the UAE. Moreover, foreign companies and other juridical persons with effective management in the UAE are considered Resident Persons for Corporate Tax purposes.


On the other hand, a "non-resident person" is a foreign individual with a permanent establishment in the UAE or derives State Sourced Income and is subject to corporate Tax on the Taxable Income. 


4. Tax grouping 

In the UAE's corporate tax regime, tax grouping, also known as consolidated tax filing, is a way that allows a group of companies to be treated as a single taxpayer for tax purposes. The Tax Group typically consists of a parent company and its subsidiaries that must be resident judicial entities in the UAE. 


The purpose of tax grouping is to simplify the tax compliance process and ensure that the tax liabilities of the group are determined correctly. Under tax grouping, the taxable income, losses, and tax credits of the group are aggregated, and the group files a single tax return, rather than each company in the group filing a separate return. 


5. Permanent Establishment

The Permanent Establishment (PE) concept determines whether a foreign individual has an established company and carries out business activities in the country. If a foreign company has a PE in the UAE, it may be subject to corporate Tax on the business profits. 


Registering, filing and paying Corporate Tax

All taxable individuals and entities (certain Exempt Persons as per FTA) must register for Corporate Tax on the Federal Tax Authority (FTA) online portal and obtain a Corporate Tax Registration Number.


Businesses must file Corporate Tax Returns by the end of the relevant tax period, either before May 31 (Financial Year) or December 31 (Calendar year). To file Corporate Tax Returns, you need to follow these steps:

- Obtain the necessary tax return forms from the FTA website.

- Prepare your financial statements and tax calculations.

- Submit the tax return form and the required documents to the FTA within the specified deadline.

- Pay any Tax due, if applicable.

Make sure to keep accurate records and comply with all tax laws and regulations to avoid penalties or legal issues. 


Reach out to qualified tax professionals to ensure you are meeting all requirements.


How can Ascent Partners help?

Ascent Partners is a boutique consultancy providing bespoke, end-to-end corporate services ranging from company formation to accounting, bookkeeping, and compliance services for entrepreneurs looking to set up their next venture in the UAE. We work alongside to strategise, startup, and scale businesses in the UAE and the broader region.


With a combined experience of 50+ years, our expert consultants provide reliable and unparalleled guidance throughout all strategic phases of a business' evolution.