Many businesses operating in the UAE have traditionally been free from paying income tax on their profits. The UAE government has announced the establishment of a federal corporate income tax as part of the most major legislative shift in the country's history.
The new UAE tax regulations is still under review but businesses operating in the UAE, on the other hand, should be aware of the next steps on the new tax regulations wether they are in the mainland or in the free zones.
We will discuss the following topics in this article:
- Definition and objectives of the corporate tax
- Effective date of the corporate tax
- Application of the corporate tax
Definition and objectives of the corporate tax
A corporate tax is a tax on a corporation's profits. Taxes are levied on taxable income, which comprises revenue less cost of goods sold (COGS), general and administrative (G&A) expenditures, selling and marketing, R&D, depreciation, and other operational costs.
The UAE aspires to solidify its status as a major worldwide center for business and investment by introducing the corporate tax.
Effective date of the corporate tax
As a result, any firm with a fiscal year beginning on July 1, 2023 and ending on June 30, 2024 will be required to conform with the UAE corporate tax. It will be applied beginning January 1, 2024, for enterprises with fiscal years beginning January 1, 2023 and ending December 31, 2023.
Application of the corporate tax
The UAE corporate tax rule is the following:
• 0% for taxable income up to AED 375,000
• 9% on taxable income in excess of AED 375,000
Large multinational corporations that meet the conditions outlined for 'Pillar Two' of the OECD Base Erosion and Profit Shifting project will be taxed differently than individuals and small companies.
We can help you to create deal with the new corporate tax. Do not hesitate to contact us if you need further information on our Contact page.