Author: Ayushi Doegar
Published: February 9, 2024
Corporate tax is an important consideration for businesses operating in Dubai, UAE. The UAE government introduced a federal corporate tax in June 2023, which applies to all companies, including foreign and locally owned entities. The tax rate is 9%, and the tax base is taxable income, which is calculated after deducting all allowable expenses. The tax return needs to be filed on an annual basis along with payment of any corresponding tax liability. There are several exemptions and reliefs also available under the corporate tax regime.
The UAE corporate tax applies to all companies, including foreign and locally owned entities. However, there are some beneficial provisions for businesses operating in free zones. Free zones are special economic zones that offer a range of benefits to businesses, including beneficial corporate tax regime and exemptions from customs duties and other taxes.
In addition to the federal corporate tax, businesses in Dubai may also be subject to other taxes, such as:
These taxes are generally based on the type of business activity, location, and other factors.
The UAE Corporate Tax regime introduces a tier system with 3 rates:
| Taxable Profit Range | Tax Rate | Details |
|---|---|---|
| Up to AED 375,000 | 0% | All annual taxable profits up to AED 375,000 shall be subject to tax at 0% |
| Above AED 375,000 | 9% | All annual taxable profits above AED 375,000 shall be subject to 9% rate |
| MNEs (Pillar 2 BEPS 2.0) | Variable | MNEs with consolidated global revenues in excess of AED 3.15 billion shall be subject to different rates as per OECD Base Erosion and Profit-Sharing rules |
Important Note: Until such time as the Pillar Two rules are adopted by the UAE, multinationals will be subject to CT under the regular UAE CT regime.
Taxable Profits Definition: Taxable profits are the accounting profits subject to certain adjustments.
The UAE government offers several tax exemptions and incentives to businesses, including:
Tax exemptions for certain industries: The UAE government offers tax exemptions for businesses operating in certain industries, such as extractive businesses.
Double Taxation Avoidance Treaties (DTAs): The UAE has entered into DTAs with several countries to prevent double taxation of income. This means that businesses that are taxed in the UAE may be able to claim a credit against their tax liability in their home country.
Employment income: The employment income of individuals is not taxable.
Businesses are required to comply with several tax compliance and reporting obligations, including:
Maintaining proper financial records: Businesses are required to maintain proper financial records, such as accounting books, invoices, and receipts etc.
Preparing annual financial statements: Businesses are required to prepare annual financial statements that comply with the International Financial Reporting Standards (IFRS) or other applicable accounting standards.
Filing annual returns: Businesses are required to file annual returns with the tax authorities.
Renewing licenses: Businesses are required to renew their licenses with the relevant authorities on a regular basis.
Fulfilling regulatory requirements: Businesses are required to fulfil other regulatory requirements, such as obtaining the necessary permits and licenses.
Important: It is important for businesses in Dubai to understand their specific tax obligations and to comply with all applicable laws and regulations. Failure to do so could result in penalties and other consequences.
Corporate tax in Dubai is a complex and evolving topic. Businesses operating in Dubai should seek professional advice to ensure that they are fully compliant with all applicable laws and regulations.
If you are an SPC Free Zone business license holder, you can get in touch with us by calling 800 SPCFZ (77239) if you have queries.
This guide provides comprehensive information about corporate tax in Dubai, UAE based on regulations introduced in June 2023. For specific tax advice related to your business situation, consult with a qualified tax advisor.