On 31 January 2022, the UAE Ministry of Finance (MoF) announced the introduction of a corporate tax (CT) regime that will apply to businesses effective for financial years starting on or after 1 June 2023. The UAE has introduced one of the lowest corporate income tax rates within the GCC region making it an attractive jurisdiction for foreign investment.
This system has been designed to integrate best practices globally and minimise the compliance burden for businesses in the UAE.
Some of the key points of the CT regime to note are:
- The standard tax rate applied will be 9% on income above AED 375,000
- 0% CT on income up to AED 375,000, which will help to support small businesses and start-ups
- Large multinationals earning more than €750 million (approximately AED 3.15 billion) in revenue will be subject to a 15% CT in line with the ‘Pillar Two’ of the OECD Base Erosion and Profit Shifting project
- Companies operating in free zones will be obliged to register and file a CT return, however, they will continue to be exempt from CT provided they comply with the regulatory requirements
- Exemptions apply for capital gains or dividends received from qualifying shareholdings and income arising from qualifying intragroup restructurings
- There are no provisions for withholding tax or advance tax
- Businesses will be allowed to utilise losses to offset taxable income in subsequent financial years. Excess tax losses may be carried forward and used against taxable income in future years, subject to certain conditions
- CT will not apply on personal income from employment, real estate and other investments, or any other income earned by individuals that does not come from business or other forms of commercial activity, whether licensed or otherwise
Additional information is expected to be announced in mid-2022 to help businesses get ready and be fully compliant ahead of the implementation on 1 June 2023. Should you need any support or advice to ensure you are fully compliant with the introduction of Corporate Tax, the team at Equiom is able to support you. Please contact Neil Wilson for more details and to discuss the impact that CT may have on you or your organisation.
This article has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The article cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact Equiom to discuss these matters in the context of your particular circumstance. Equiom Group, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this article or for any decision based on it. For information on the regulatory status of our companies, please visit www.equiomgroup.com/regulatory