The UAE introduces 9% corporate tax from June 1. What does it mean for businesses?

It’s a Federal Tax, so it will apply for every Emirate, for every jurisdiction (both Mainland and Free Zones).

The competitive and internationally compliant corporate tax regime, combined with the UAE's extensive network of double taxation treaties, solidifies the UAE's position as a leading jurisdiction for business and investment, as explained by the Ministry of Finance.

Is it the end of tax free heaven on earth named the UAE? Not exactly, let’s have a closer look into that.

How is the new corporate tax going to work? movingo ’s step-by-step guide.

Mainland

Corporate Tax will be calculated at?9% of the net profit?shown in the company's financial statements. The tax will be levied after the taxable value exceeds AED 375,000/USD 102,000.

Now good news for startups and SMEs: the Ministry of Finance has recently published an addition to the Law called Small Business Relief, which provides benefits to certain categories of small businesses.

According to this, small Mainland-based businesses with income ranging from AED 375,000 to AED 3 million/USD 102,000 to 817,000 for the tax period are also exempt from corporate tax. This benefit is valid for several years until the end of 2026. However, if the company's income exceeds AED 3 million during this period, the benefit can never be used again, even if the small business does not generate such profits in the next tax period.

Free Zones

The application of the new Corporate Tax to companies in Free Zones is explained in “Article 18” of the main Law (you can find the link to the original document at the end of this post).

In sum, Corporate Tax will for “Qualifying Free Zone Persons” are as follows:

a) 0% on Qualifying Income

b) 9% on Taxable Income that is not Qualifying Income.

The criteria for Qualifying Income were issued by the Cabinet based on the Minister's suggestion. …but it is still not clear: what exactly is the Qualifying income and how to qualify for that? The entire business world is waiting for an explanation from the UAE's authorities.

If your company falls into the taxable category, you will start paying the corporate tax from the new tax period. Some companies will begin on June 1st, 2023, while others will start from January 1st, 2024.

If you’re just thinking of starting a business in the UAE and the new Law makes you wonder, remember that

?Dividends and capital gains remain tax free, regardless of jurisdiction.

?Personal income tax will also remain 0%.

Where else would you get those benefits?

Getting Corporate Tax registration number

It’s mandatory for everyone: Mainland and Free Zone, small and “big”. Registration for tax payment opened in the UAE on May 16th. The process is overseen by the Federal Tax Authority (FTA). You can register and obtain a tax identification number through the EmaraTax digital services platform.

Did you try and it looks tricky? We got your back: drop us a message and we’ll be happy to support you with obtaining Corporate Tax registration number for your company.

Also you can find out “How to legally reduce taxes by opening a company in the UAE” from our webinar on Youtube.

The Corporate Tax Law consists of a 56-page document that can be fully reviewed on the website of Ministry of Finance of the UAE.