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New corporate tax in UAE: Will it apply to your personal income?
All your questions answered about eligibility, exemptions and more
The UAE's Ministry of Finance on Monday announced the introduction of federal corporate tax on business profits for organisations that begin their first financial year on or after June 1, 2023.
Here are some of the important takeaways from the announcement by the Federal Tax Authorities:
Who will the new tax apply to?
The corporate tax will apply to all businesses and commercial activities alike, except for the extraction of natural resources which will remain subject to Emirate level corporate taxation.
Are there any exemptions?
A 0% tax rate will be applicable on taxable profits up to Dh375,000, in an attempt to support small businesses and startups.
Will the tax apply to personal income?
No corporate tax will apply on personal income from employment, real estate and other investments, or on any other income earned by individuals that does not arise from a business or other form of commercial activity licensed or permitted to be undertaken in the UAE, according to WAM.
What about foreign investors?
Given the position of the UAE as a global financial centre and international business hub, the UAE will not impose withholding taxes on domestic and cross border payments.
Foreign investors who do not carry on business in the UAE will not be subject to corporate tax.
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Will the new law impact current free zone incentives?
The UAE corporate tax regime will continue to honour the corporate tax incentives currently being offered to free zone businesses that comply with all regulatory requirements and that do not conduct business with mainland UAE.
What will the tax rate be?
The corporate tax has been set at a standard statutory tax rate of 9 per cent.
What are the other guidelines?
Businesses will only need to file one corporate tax return each financial year and will not be required to make advance tax payments or prepare provisional tax returns. Transfer pricing and documentation requirements will apply to UAE businesses with reference to the OECD Transfer Pricing Guidelines.
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