What is corporate tax?
- Corporate tax is a direct tax on the net income or profit of the business in the UAE.
- Corporate tax is sometimes also referred as corporate income tax or business profit tax.
- Corporate tax will be charged on the annual taxable income AED 375,000 or more at following rates.
- Corporate tax rate
- 0% of corporate tax will be applied if the business has net income up to AED 375,000
- 9% of corporate tax will be applied if the business has net income above AED 375,000
- Different tax rate for large multinationals that meet specific criteria set with reference to pillar two of the OECD
PILLAR TWO OF ORGANIZATION OF ECONOMIC CO-OPERATION AND DEVELOPMENT (OECD) STATES: if there are large multinational companies whose revenue is at least 750 million EUR or AED 3.15 billion annually then they must pay corporate tax at rate of 15%.
Who is exempted from corporate tax?
- Business engaged in the extraction of natural resources they will remain subject to emirate level corporate taxation and be outside the scope of UAE corporate tax.
- Individual will not be subject to corporate tax on income from employment, real estate and investment.
- No corporate tax will apply on foreign investors who do not carry business in the UAE.
When will UAE corporate tax become effective?
- Corporate tax will be effective from financial year starting on or after 1st June 2023.
How UAE corporate tax liability is calculated?
Suppose a business has earned a net income of AED 450,000 in a given financial year.
CT is calculated as follow:
- Taxable income of AED 0 – 375,000 at 0% = AED 0
- Taxable income exceeding AED 375,000 (AED 450,000 – AED 375,000 = AED 75,000) at 9% = AED 6,750
- UAE corporate tax liability of the year will be A