UAE Corporate Tax 2023: Ultimate Guide

The UAE has become a popular destination for investors and businesses due to its favorable tax policies, including the absence of a value-added tax (VAT) in specific sectors. 

According to the Global Entrepreneurship Monitor’s (GEM) Global Entrepreneurship Index 2022 report, UAE is the best place to do business, making it an attractive option for entrepreneurs and investors. In addition, the country’s economy has been growing steadily in recent years, with a GDP of $ 599 billion in 2022, according to the International Monetary Fund.

This blog aims to provide an in-depth guide to the UAE corporate tax 2023 (CT), including VAT, and other relevant regulations. 

We will also explore the various sectors exempt from VAT and provide insights into the country’s economic landscape. Our goal is to help businesses and investors make informed decisions about investing in the UAE and take advantage of its many opportunities for growth and success. So let’s get started

What is UAE Corporate Tax?

The United Arab Emirates (UAE) implemented a federal corporate tax law in 2023, which applies to all companies operating in the country. The corporate tax rate in the UAE is set at 9%, but there are some exemptions and reduced rates for specific industries and types of companies. 

One of the main features of the UAE corporate tax system is its relatively low tax rate, which makes it an attractive location for foreign investors looking to expand their business. Additionally, the UAE does not impose any personal income tax, making it a desirable destination for individuals seeking to work and live in a tax-friendly environment.

Corporate tax is an essential source of revenue for the UAE government, which has been working to diversify its economy and reduce reliance on oil exports. By implementing a corporate tax system, the government aims to create a more sustainable revenue stream to support the country’s ongoing development and infrastructure projects. 

At the same time, the tax system helps to ensure that businesses operating in the UAE contribute their fair share towards the country’s growth and development. Overall, the UAE’s corporate tax system is essential to its economic strategy and plays a vital role in its long-term prosperity.

UAE Corporate Tax Rates

The recently revealed UAE CT regime establishes a three-tiered pricing structure:

• Every yearly taxable profit less than AED 375,000 is subject to a 0% rate.
• A 9% rate will apply to all annual taxation earnings over AED 375,000.
• The OECD Base Erosion and Profit-Sharing regulations will apply to ALL MNEs covered by Pillar 2 of the BEPS 2.0 scheme (i.e., have combined worldwide sales of over AED 3.15 billion).
• Accounting earnings that have been adjusted are taxable profits.

Taxable Persons Under UAE Corporate Tax 2023

UAE companies and other juridical persons that are effectively managed, incorporated, and controlled in the UAE;

• Individuals who conduct a business or business activity in the UAE.
• Non-resident juridical persons (foreign legal entities) that have a permanent establishment in the UAE.
• As “Taxable Persons,” judicial entities formed in a UAE Free Zone are also subject to corporate tax and must abide by the rules outlined in the corporate tax law.
• A Free Zone company owner who satisfies the requirements to be regarded as a qualifying Free Zone person may profit from a corporate tax rate of 0% on their qualifying income.
• Withholding tax may apply to non-residents who do not have a permanent establishment in the UAE or who receive revenue from the country unrelated to their permanent establishment.

Who Is Exempted From Corporate Tax in UAE?

The following revenue will generally not be subject to income tax:

• UAE company’s dividend revenue from its eligible shareholdings (to be defined in the law)
• monetary benefits.
• Gains from company restructuring.
• Intra-group trade profits.
• UAE withholding tax won’t apply to local or international transfers.

Moreover, the CT will not apply to:

• A person’s revenue from wages, other employment-related compensation, whether from the public or private sector, interest, and other sources like bank accounts or savings plans.
• A foreign investor’s income is earned from capital gains, dividends, royalties, interest,  and additional investment returns.
• Investment in real estate by individuals in their personal capacity.
• Dividends, capital gains, and other income individuals earn from owning shares or other securities in their personal capacity.

FAQs About Corporate Tax in UAE

Conclusion

UAE Corporate Tax has undergone significant changes in recent years. As we enter 2023, businesses and investors must stay up-to-date on the latest regulations and exemptions. 

The country’s favorable tax policies, low VAT rate, and business-friendly environment continue to attract foreign investment and promote economic growth. However, businesses can position themselves for success in this dynamic and thriving market by understanding the nuances of the UAE’s tax system and taking advantage of the various exemptions and participation exemptions. 

We hope this guide has provided valuable insights and information to help navigate UAE corporate tax 2023 and support informed decision-making for businesses and investors. If you want to learn about Business Setup in UAE or Dubai we have guides on it.