When to register, file and pay corporate tax?
All taxable persons (including free zone persons) are required to register for corporate tax and obtain a registration number. Taxable Persons are required to file a 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.
How about tax groups? How to calculate the taxable income of a tax group?
Two or more taxable persons who meet certain conditions can apply to form a tax group and be treated as a single taxable person for corporate tax purposes. To form a tax group, both the parent company and its subsidiaries must be resident juridical persons, have the same financial year and prepare their financial statements using the same accounting standards.
To determine the taxable income of a tax group, the parent company must prepare consolidated financial accounts covering each subsidiary that is a member of the tax group for the relevant tax period. Transactions between the parent company and each group member and transactions between the group members would be eliminated to calculate the taxable income of the tax group.
Will the withholding tax rate apply to UAE-sourced income?
A zero per cent withholding tax may apply to certain types of UAE-sourced income paid to non-residents. Because of the 0 per cent rate, in practice, no withholding tax would be due and there will be no withholding tax-related registration and filing obligations for UAE businesses or foreign recipients of UAE-sourced income.
What expenses are deductible from corporate tax?
All legitimate business expenses incurred wholly and exclusively to derive taxable income will be deductible, although the timing of the deduction may vary for different types of expenses and the accounting method applied. For capital assets, the expenditure would generally be recognised by way of depreciation or amortisation deductions over the economic life of the asset or benefit.
Who is exempted from the corporate tax?
Under the Ministry of Finance’s directive, the following entities are exempted from the corporate profit tax
- Government and government-controlled entities
- Extractive businesses and non-extractive natural resources businesses
- Quality public benefit entities
- Public or private pension and social security funds
- Qualifying investment funds
- Wholly-owned and controlled UAE subsidiaries of a government-controlled entity
- Qualifying investment fund, or a public and private pension or social security fund
- Business undergoing liquidation or termination
- Personal income earned from employment, investments, and real estate without licensing requirements
- Salary (perks, allowances and bonuses)
- Residential rental income on real estate, and investment income (from bonds, shares, and other securities) are not taxable.
- Freelancers’ income up to Dh 1 million
Note: Some of these exemptions are subject to meeting certain conditions. Visit FTA Website to understand more.
Who is subject to corporate tax?
Corporate Tax applies to “Taxable Persons” as explained under
- UAE companies and other juridical persons that are incorporated or effectively managed and controlled in the UAE
- Natural persons (individuals) who conduct a business or business activity in the UAE as specified in a Cabinet Decision
- Non-resident juridical persons (foreign legal entities) that have a permanent establishment in the UAE
Is the 9% UAE corporate tax rate high? Why is it being levied?
No. It is one of the lowest rates in the world. Some countries have levied nearly 30 per cent corporate tax.
The tax is being introduced to accelerate the country’s development and transformation. The certainty of a competitive corporate tax regime that adheres to international standards, together with the UAE’s extensive network of double tax treaties, will cement the UAE’s position as a leading jurisdiction for business and investment.
How can a business deregister from corporate tax in UAE?
Businesses are required to apply for tax deregistration when they cease to be subject to corporate tax. The reason for deregistration can range from cessation to company liquidation. Such companies need to apply to the FTA within three months from the date of cessation.
The FTA will deregister your business if you have filed corporate tax returns, settled all of its corporate tax liabilities, and settled any penalties due for periods up to and including the date of cessation. The FTA may deregister a business based on available information if the person doesn’t apply for deregistration within the time frame or comply with the payment and filing obligations.
Any exemptions from UAE corporate tax?
Yes, the exemptions are :
- Businesses engaged in the extraction of natural resources are exempt from CT as these businesses will remain subject to the current Emirate-level corporate taxation.
- Dividends and capital gains earned by a UAE business from its qualifying shareholdings will be exempt from CT.
- Qualifying intra-group transactions and reorganizations will not be subject to CT, provided the necessary conditions are met.
What is the UAE corporate tax deadline for filing returns?
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. E.g For a business whose first tax period begins on January 1, 2024 and ends on December 31, 2024, the return and payment must be filed between January 1 and September 30, 2025.