Corporate Tax in UAE
The authorities in UAE have announced the introduction of corporate tax from 1st June,23. Corporate tax is a form of direct tax levied on the net income or profit of corporations and other business entities.
The objective of Corporate Tax in the UAE
By introducing the Corporate Tax, the UAE’s main objectives are:
- Enhancing the UAE's standing as a premier global center for trade and investment
- Observing global tax transparency norms and avoiding detrimental tax practices
- Accelerating the development and transformation of the UAE to fulfill its strategic goals
Scope of Corporate Tax in UAE
As per the UAE government, the scope of corporate tax will be:
- All companies and people working in the UAE have valid commercial licenses.
- The UAE Corporate Tax regime will keep honoring the corporate tax incentives currently being offered to free zone businesses that follow all regulatory requirements and that do not have the business set up on the UAE’s mainland.
- Only foreign organizations and people who regularly or continuously conduct trade or business in the UAE are eligible.
- Banking operations
- Businesses or Companies involved in the management, development, building, agency, and brokerage of real estate.
Who will be subject to corporate tax?
Except for the extraction of natural resources, which will continue to be subject to corporate taxes at the level of the local emirate, all enterprises and commercial operations in the UAE are subject to corporation tax.
How will it be decided whether a legal entity has “businesses” that fall within the scope of a country's corporate tax?
All actions conducted by the legal entity will be regarded as "business activities," and as a result, they are subject to the nation's corporation tax.
How will it be decided whether an individual has a “business” that falls within the scope of a country's corporate tax?
The person who currently holds (or must receive) a business license or permits to engage in the relevant commercial, industrial, and/or professional activity in the nation can typically be used to determine this.
Will corporate tax be levied on the salary earned on the job?
Corporate tax in the country will not be applied to an individual's salary or other income earned from a job, whether it is received from government work or from the private sector.
Will an individual with a commercial license to do business in the UAE be subject to state corporate tax?
An individual's salary or other income from a job, whether it is received through work in the public or private sectors, is not subject to corporate tax in the nation.
Will the income earned by the Freelancer be subject to corporate tax?
Although income from activities carried out under the freelance trade license is typically subject to corporate tax, no tax will be required unless his net yearly income exceeds 375,000 dirhams.