Corporate Tax Law UAE

The Corporate Tax Law provides the legislative basis for the introduction and implementation of a Federal Corporate Tax (“Corporate Tax”) in the UAE and is effective for financial years starting on or after 1 June 2023.

Corporate Tax applies to the following “Taxable Persons”:

UAE companies and other juridical persons that are incorporated or effectively managed and controlled in the UAE;

1. Natural persons (individuals) who conduct a Business or Business Activity in the UAE as specified in a Cabinet Decision to be issued in due course; and
2. Non-resident juridical persons (foreign legal entities) that have a Permanent Establishment in the UAE (which is explained under [Section 8]).
3. Juridical persons established in a UAE Free Zone are also within the scope of Corporate Tax as “Taxable Persons” and will need to comply with the requirements set out in the Corporate Tax Law. However, a Free Zone Person that meets the conditions to be considered a Qualifying Free Zone Person can benefit from a Corporate Tax rate of 0% on their Qualifying Income (the conditions are included in [Section 14]).
4. If the income from free zone is non-qualified, then limit of AED 375000 is not applicable and company have to pay tax on entire Profit
5. Provision of transfer pricing will be applicable to both UAE Mainland entities and Free Zone entities (OECD guideline)
6. PE impact may need to be assessed for non-residents owning real estate in UAE
7. Non-resident persons that do not have a Permanent Establishment in the UAE or that earn UAE sourced income that is not related to their Permanent Establishment may be subject to Withholding Tax (at the rate of 0%). Withholding tax is a form of Corporate Tax collected at source by the payer on behalf of the recipient of the income. Withholding taxes exist in many tax systems and typically apply to the cross-border payment of dividends, interest, royalties and other types of income.
8. Non-Taxable income as per UAE CT law

• Dividends (Noted concept of participate income will appliable)
• Capital gains
• Interest
• Income from other sources in business activity, provided it should not be more then 5% of revenue of company

Taxable Persons are required to file a Corporate Tax return for each Tax Period within 9 months from the end of the relevant period. The same deadline would generally apply for the payment of any Corporate Tax due in respect of the Tax Period for which a return is filed.

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