UAE is known as a tax-friendly country that attracts businesses and investors from around the world. Corporate tax is a direct tax levied on the taxable income of corporations and other businesses. To align with international tax and establish a structured financial system, the UAE implemented a corporate tax system, which has been effective from June 1, 2023.
Ensuring small businesses and startups are not impacted, is why the new tax system is designed to be business-friendly. In the UAE, corporation taxes on profits is 9%. However, small business owners with a turnover of less than AED 1 million are still exempted from paying any corporate tax, and the UAE offers one of the lowest tax rates globally. This article provides everything you need to know about corporate tax in the UAE, including who needs to pay, the documents required, and more.
Corporate Tax Rate in the UAE:
- Corporate tax, also known as Corporate Income Tax or Business Profits Tax, was introduced by the UAE Ministry of Finance. The applicable corporate tax rates are as follows:
- For companies with turnover up to AED 1 million and profits up to 3,75,000 AED, the tax rate is 0%, meaning there is no tax on profits with corporates if their turnover is less than 1 million / profits up to 3,75,000 AED a year, and 9% on taxable income thereafter.
- For qualifying free zone entities, the tax rate is 0% on qualifying income and 9% on non-qualifying taxable income.
VAT Rate in UAE:
VAT was introduced in the UAE 1st of January in 2018, and the current standard VAT rate in the UAE is 5%, which applies to almost all taxable goods and services, including retail, dining, electronics, etc.
Some goods and services are taxed at 0%. These supplies are included in the healthcare supplies, valuable metals like gold and silver, education, and exports.
However, certain goods and services are exempt from VAT in the UAE, no VAT is charged here, and businesses cannot claim VAT refunds. Certain sectors include residential property (sale and lease), local passenger transport, healthcare services, etc.
Who Needs to Register for Corporate Tax in the UAE?
Most businesses must register for UAE Corporate Tax. Here are those who are required to register:
- Mainland Businesses: All companies operating in the UAE mainland must register and pay corporate tax as per the applicable laws.
- Free Zone Companies: Although some companies might be excluded, these businesses usually have to register. (If you're planning to setup a company in Dubai Free Zone, connect with us at enquire@kdpaccountants.com) .
- Foreign Companies: Any foreign business with a permanent establishment in the UAE is required to register and comply with corporate tax regulations.
- Individual Professionals or Freelancers: Individuals earning more than AED 375,000 from professional services or businesses must register and adhere to corporate tax requirements.
Required Documents for Corporate Tax Registration in UAE:
The list of documents needed for Corporate Tax Registration is as follows:
- Trade license copy.
- Memorandum of Association (MOA) or Articles of Association (AOA).
- Owners/partners’ passport copies.
- Owners/partners’ Emirates ID.
- Contact details of the concerned person (mobile number and email address).
- Company contact details (official address and PO details).
Conclusion:
Understanding corporate tax and VAT is essential for businesses to remain compliant and avoid fines. Whether you are planning to setup a company in Dubai or you are already running one, staying updated with tax regulations is essential.
It’s best to consult with experts who can guide you through the regulations effectively if you need expert advice who help you navigate tax and VAT in UAE compliance. If you need assistance with company setup in the UAE or corporate tax registration, connect with us at enquire@kdpaccountants.com for professional support.
Frequently asked questions:
What is Corporate Tax?
Corporate tax is a direct tax that is levied on the net income or profit of any company or any other business.
How much is the corporate tax rate in the UAE?
For individuals with taxable income up to AED 375,000, the tax rate is 0% and 9% on taxable income exceeding AED 375,000.
What is VAT in the UAE?
VAT is an indirect tax. It imposes on most supplies of goods and services that are bought and sold.
What documents are required when we apply for corporate tax registration?
Documents like trade license copies, MOA and AOA, partners' Emirates or passport ID, email addresses, company addresses, and proof of authorization to register corporate tax in UAE.
The above note is subject to further study and clarification. This note does not form an opinion from our end and before taking any decision based on the above, it is recommended to consult our experts on the subject. Kamdar, Desai & Patel will not be liable for any damages (including, without limitation, damages for loss of business projects, or loss of profits) arising in contract, tort, or otherwise from the use of or inability to use this article or any of its contents, or from any action taken (or refrained from being taken) as a result of using this article or any such contents.
