In the United Arab Emirates, the UAE Corporate Tax will be applied over the whole country and will apply equally to all business and commercial activity, with the exception of natural resources, which will continue to be taxed at the Emirate level in the UAE.
The following rates will be applied to company tax in the United Arab Emirates:
In addition to being subject to UAE Corporate Tax and being required to register and submit a Corporate Tax report, free zone enterprises will be eligible for Corporate Tax vacations and zero percent taxation as long as they meet all regulatory requirements and do not engage in Corporate Tax activity on the UAE’s inland territory, which is the United Arab Emirates.
According to the press release and FAQs, a new tax rate will be adopted for big multinational firms that fulfill the conditions of the Organization for Economic Cooperation and Development’s ‘Pillar Two’ of the Base Erosion and Profit Shifting project Corporate Tax Rates (i.e. that have consolidated global revenues above EUR 750m).
Except for a few exclusions and revisions, corporate tax will be imposed on the accounting net profit reported in the business’s financial records, not on the gross profit. If you suffer a tax loss after the Corporate Tax Effective Date, you may carry it forward and apply it to your taxable income in subsequent quarters.
In the following cases, there would be no UAE Corporate Tax imposed:
Income from dividends, capital gains, and other investment returns received by foreign investors; employment income, real estate income, savings income, investment returns, and other income generated by individuals acting in their own personal capacity that cannot be traced back to a UAE trade or corporation.
Exemptions from UAE Corporate Tax will be granted for the products listed below:
- Intra-group transfers that qualify; capital gains and dividends on qualified shareholdings that qualify
- Taxation and reorganisation of corporations
Taxation of corporations
Interest, dividends, royalties, and other payments, both local and international, will be unaffected by the change.
Withholding taxes are charged on corporate income in the United Arab Emirates, and international tax credits will be available for taxes collected by UAE enterprises on revenue received outside the country.
UAE Corporate Tax will be transmitted electronically once every fiscal period, and there will be no necessity to make advance payments based on provisional tax data in the future.
Group firms in the United Arab Emirates may join a tax group and submit a single tax return for the whole group, as well as transmit tax losses to other group members, according to the law.
Regarding transfer pricing regulations and documentation requirements, the UAE Corporate Tax system will follow the Transfer Pricing Guidelines issued by the Organization for Economic Cooperation and Development.
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