Corporate Tax is a direct tax levied on the net income or profit of corporations and other businesses.
This is also called as “Corporate Income Tax” or “Business Profits Tax”.
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Implementation Date of CT
The UAE CT regime will become effective for financial years starting on or after 1 June 2023.
| Entity | Financial Year | UAE CT applicable from |
|---|---|---|
| A | 1 Jan to 31 Dec | 1 Jan 24 onwards |
| B | 1 Apr to 31 Mar | 1 Apr 24 onwards |
| C | 1 Oct to 30 Sep | 1 Oct 23 onwards |
| D | 1 Jul to 30 Jun | 1 Jul 23 onwards |
Corporate Tax is Applicable to
Resident Person
- Person incorporated in UAE
- Person incorporated outside UAE and managed and controlled in UAE
- Natural person conducting business activity
Person incorporated in UAE includes:
- LLCs, PSCs, PJSCs
- Individual, freelancer
- Foreign subsidiary in UAE
- Banks
- Entities in Free zones
- Sole establishments & civil(individual capacity)
Non-Resident Person
- Person having Permanent Establishment (PE) in UAE
- Derives income from UAE
- Has any connection in thestate (cabinet decision)
Permanent Establishment (PE) means:
- Fixed or permanent place in the State
- A branch
- An office
- A factory
- A workshop
- similar
- A Person habitually conducts business for non-resident
To understand the impact of Corporate Tax on your business
Corporate Tax rates (other than Free Zone)
0% – on the portion of Taxable Income not exceeding AED 375,000 (to be confirmed by the cabinet decision)
9% – on the portion of Taxable Income exceeding AED 375,000 (to be confirmed by the cabinet decision)
Transfer Pricing
- Transfer Pricing Regulation will apply to UAE Mainland as well as Free Zones
- A Qualified Free Zone can continue to be qualified for 0% corporate taxes if it meets transfer pricing regulations and documentation (if not followed a Free Zone can lose the benefit 0% CT).
- The Tax registrants need to fulfill guidelines of Arms Length Price (ALP).
- 5 methods as mentioned by OECD can be used to compute ALP.
- Choice of method depends on Contractual terms, Characterisation, economic circumstances, FAR analysis and business strategies.
- The Most Appropriate Method (best suitable) concept used rather than Most Preferred Methods (hierarchy).
- The corresponding adjustment concept is brought in if a foreign tax administration makes adjustments to the ALP of the taxpayer.
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