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Ways to Find Whether Your Company Falls Under UAE Corporate Tax

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The CT (Corporate Tax) will get into effect in the UAE in June 2023. Therefore, investors should consider whether their businesses will be susceptible to it. Conducting business tax assessments with corporate tax services will help investors be best equipped when the tax gets implemented the next year. Because the government has yet to pass a corporate tax law in the UAE, the existing assessments are based on preliminary data provided by the FTA and the Ministry of Finance. According to primary sources, all businesses in the UAE are subject to corporate taxation. However, certain income types have been designated as either exempt or non-taxable. We shall discuss which types of income are excluded or exempted from the scope of corporate taxation in the UAE.

A UAE-registered management consultancy firm, Fortius Consulting helps businesses remain compliant with UAE corporate laws. We employ the best methods to reduce UAE tax liability and optimize your tax filings. Join us for expert tax advice and planning for your business.

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All About the Corporate Tax Services & Its Scope in the UAE

Corporations and other businesses pay a corporate tax, a direct tax defined as net revenue or profit. The term "corporate tax" can also refer to "corporate income tax" or "business profits tax." A strong Corporate Tax regime rooted in international best practices would strengthen the UAE's position as a significant global center investment and accelerate the country's transformation and growth to meet its strategic objectives. The UAE reaffirms its commitment to meeting global standards for greater transparency and curbing unfair tax practices by constructing a CT regime.

Except for exempted entities, the latest corporate tax is applicable to all companies and commercial activities. The government deems all legal bodies' actions as "business activities." Thus, they are subject to UAE corporate tax. On taxable income exceeding AED 375,000, the government will levy a 9% corporate tax. However, taxable income until AED 375,000 will be taxed at 0%. Furthermore, multinationals that meet specific criteria will be liable for a different tax rate. Corporate tax services in Dubai can provide more information on the tax rates and scope.

In the UAE, not all income is subject to corporate taxation. The UAE Ministry of Finance has published a list of non-taxable income. However, it is advisable to consult with tax professionals in Dubai to ascertain whether the revenue is non-taxable. In the UAE, the following revenue is not taxable:

  • Individual salaries and income generated through jobs will not be levied under the corporate tax in the UAE.
  • Individual investments in real estate made in their account will not be imposed. However, this only applies if the person is not required to acquire a commercial license or permit to engage in such tasks.
  • Capital gains, dividends, and other income generated from personal ownership of shares are exempt from corporate taxation in the UAE.
  • The UAE will not impose a corporate tax on income earned by individuals from deposits or savings plans.

The incomes that are exempted from corporate tax are:

  • Capital gains and dividends received by UAE-based businesses from qualifying shareholdings. It is an ownership interest that meets certain criteria outlined in a UAE business's forthcoming corporate tax law.
  • If the necessary conditions are met, eligibility for reorganizations and intra-group transactions will be exempt from UAE corporate tax.

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Rules & Conditions for Freelancers, Free Zone Companies & Fuel Industries

The taxability of freelance income is of interest because the Ministry of Finance has already mentioned that profits generated through employment could not be taxed under the UAE corporate tax. But the corporate tax will be levied on money generated from activities performed under a freelance permit or license. It is also worth noting that if the freelancer's annual net income does not exceed AED 375,000, they will not be asked to pay corporate tax. Freelancers in Dubai can consult with tax advisors to determine the taxability of their earnings.

The UAE corporate tax will apply to companies functioning in free zones. However, free zone companies doing business in the main areas of the UAE will be required to pay corporate tax. Meanwhile, free zone businesses will continue to benefit from the current tax breaks as long as they meet all regulatory requirements.

Is it possible for freezone companies to pay no corporate tax? The proceeds from the transactions mentioned below will benefit from the zero percent CT.

  1. Transactions with companies based outside of the UAE.
  2. Trading with businesses in the same or a different freezone. A few
  3. Regulated financial services are directed at foreign market sales of goods, i.e. (VAT defined zones) to mainland customers if the consumers are distributors as per the record.

Businesses in the UAE's oil and gas industries and those engaged in natural resource extraction will not be susceptible to UAE corporate tax. Because the latest UAE corporate tax is imposed at the federal level, such companies will be exempt. These businesses, however, are already liable for corporate tax according to local government norms and will continue to be so. You can get professional help from renowned corporate tax services to know more about the various tax rules and conditions freshly updated in recent times.

Also Read:Are Freezone UAE Firms Exempted From Corporate Tax

An Overview of Corporate Tax Services & its Applicability in the UAE

The UAE has executed a federal tax system pertaining to all businesses and commercial activity throughout the country. However, there are a few exceptions:

  1. Companies involved in the extraction of natural resources. These will generally apply to the Emirate's tax decrees.
  2. Individuals generate income by means of their capacity without requiring a commercial license.
  3. Businesses enrolled in Free Trade Zones should adhere to all regulatory requirements and are prohibited from doing business on the mainland.

Wrap Up

Although the UAE corporate tax cannot be implemented until 2023, businesses must be aware of the tax laws and regulations and be prepared for them. Understanding the taxability details of their businesses enables investors to easily prepare for and accept the new tax regulations. Fortius Consulting Services, one of the best business consulting services in the UAE, provides professional corporate tax advisors for investors. With adequate resources to advise on UAE corporate tax, they can take the shift to a direct tax regime that is simple and stress-free.

Fortius Consulting Services is a trusted name for business consulting and CFO services in the UAE, Singapore and India. Through our expert consulting and advisory services,we assist organisations across the UAE & Asia to boost their profitability, improve operational effectiveness, increase management capability, institutionalise strategies, and upgrade their internal structures.


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