SBMG&Co. - Corporate Tax Consultancy

CORPORATE TAX CONSULTANCY

The UAE Ministry of Finance has introduced Corporate Tax, a direct tax imposed on the net income of corporations and other businesses, on 9th December 2022 and this is going to be effective for financial years on or after 1st June, 2023. The Corporate Tax is also referred to as “Business Profits Tax” or “Corporate Income Tax” in other jurisdictions

The Corporate Tax of UAE will remain the lowest tax rate in the world, and it reduces the compliance burden on businesses. The introduction of Corporate Tax will increase the revenue of the UAE which is essential to stand competitive in the global business and investment environment. This would bring more financial discipline in the corporate culture which would in turn result in the proper maintenance of record keeping. The proposal of introducing Corporate Tax stems from the UAE’s commitment to meet international standards of tax transparency while protecting start-ups and small businesses in the UAE.

Key takeaways from the UAE Corporate Tax

Natural persons shall not be subject to corporate tax on income derived from employment, real estate, share investments, or other personal income that is not related to UAE trade or commerce.
Non-residents are required to pay tax on income earned in the UAE as well as taxable income from PE.
The business’s adjusted accounting net profit will be subject to corporate tax.
Businesses operating in free zones are still eligible for corporation tax benefits as long as they meet all criteria.
The extraction of natural resources will be excluded from corporate tax, as it will remain subject to emirate level corporate taxation and the branches of foreign banks.
Domestic, cross-border payments and specified transactions are subject 0% withholding tax (WHT).
If certain requirements are met, capital gains and dividends are free from corporate tax.
Companies based in the UAE may establish a tax group provided certain requirements are completed.
If certain requirements are met, the UAE CT framework permits the transfer of tax losses from one group company to another group company having profits.
For eligible intra-group transactions and restructuring, there is group relief.
The UAE CT scheme permits a credit for taxes paid in another country against the UAE CT responsibility on income with a foreign source. Generous loss transfer and utilization rules will be available to businesses.
Transfer pricing as per the OECD guidelines is applicable.
Accounting profit, as per the international accounting standards. But relaxation for certain taxpayers.
An alternative mechanism for determining taxable income simplified financial and tax reporting obligations for certain taxpayers (e.g., Start-ups and small businesses).
Designated Freezone persons will not be subject to UAE CT

Registering, Filing and Paying Corporate Tax

All Taxable Persons (including Free Zone Persons) and those exempt persons who are required to register for corporate tax must register for Corporate Tax and obtain a Corporate Tax Registration Number.
During each Tax Period, Taxable Persons are expected to submit a Corporate Tax return within nine months after the conclusion of the applicable period. The same deadline would apply for the payment of any Corporate Tax due in respect of the Tax Period for which a return is filed.