According to UAE Federal Decree-Law No. 47 of 2022 on Taxation of Corporations and Enterprises (the "Corporate Tax Law"), enterprises will be subject to UAE corporate tax from the beginning of their first fiscal year, which begins on or after June 1, 2023.
What is corporate tax? Corporate tax is a form of direct tax levied on the net income or profits of corporations and other legal entities from their business.
The corporate tax will be applied to:
All enterprises and individuals conducting business activities on the basis of a commercial license;
In the UAE Free Zone (The regime will continue to apply the KN benefits currently offered to free zone enterprises that comply with all regulatory requirements and that do not conduct business on the UAE mainland);
Foreign legal entities and individuals only if they conduct trade or business in the UAE on a permanent or regular basis;
Banking operations;
Companies engaged in real estate management, construction, development, agency and brokerage activities.
According to the Ministry of Finance, corporate tax rates are:
0% for taxable income up to 375,000 dirhams UAE;
9% for taxable income over 375,000 dirhams UAE;
another tax rate (not yet specified) for large multinational corporations that meet the specific criteria set for the "Second Component" of the OECD project on base erosion and profit shifting.
Corporate tax will NOT apply to:
Earnings of an individual, wages and other income from work, regardless of whether they are received in the public or private sector;
Interest and other income earned by an individual from bank deposits and savings schemes;
The income of a foreign investor received from dividends, capital gains, interest, royalties and other investment income;
Investments of individuals in real estate for their personal purposes;
Dividends on legal capacity, capital gains and other income earned by individuals from owning shares or other securities in a personal capacity.
The Ministry of Finance (MoF) has published the approved Resolution of the Cabinet of Ministers No. 116 dated 2022 on the applicable threshold level of taxable income for corporate tax. This decision followed the issuance of a Federal decree-the Law on Taxation of Corporations and Businesses (“Corporate Tax Law”) in December 2022.
Businesses will be subject to UAE corporate tax from the beginning of their first fiscal year, which begins on or after June 1, 2023. The rate was set at 9% and applies to taxable income over 375,000 dirhams UAE. Based on this decision, the 0% rate will be applied to taxable income that does not exceed 375,000 dirhams during the same tax period, regardless of the number of enterprises or types of business activities that the taxable person is engaged in during this period.