Corporate Tax in Dubai, UAE – A Comprehensive Guide 2024

February 9, 2024
Corporate Tax in Dubai, UAE

Corporate tax is an important consideration for businesses operating in Dubai, UAE. The UAE government introduced a federal corporate tax in June 2023, which applies to all companies, including foreign and locally owned entities. The tax rate is 9%, and the tax base is taxable income, which is calculated after deducting all allowable expenses. The tax return needs to be filed on an annual basis along with payment of any corresponding tax liability. There are several exemptions and reliefs also available under the corporate tax regime.

Dubai’s Corporate Tax Framework

The UAE corporate tax applies to all companies, including foreign and locally owned entities. However, there are some beneficial provisions for businesses operating in free zones. Free zones are special economic zones that offer a range of benefits to businesses, including beneficial corporate tax regime and exemptions from customs duties and other taxes.

In addition to the federal corporate tax, businesses in Dubai may also be subject to other taxes, such as municipality fees, commercial license fees, and sector levies. These taxes are generally based on the type of business activity, location, and other factors.

Corporate Tax Rates

The UAE Corporate Tax regime introduces a tier system with 3 rates:

  • All annual taxable profits up to AED 375,000 shall be subject to tax at 0%.
  • All annual taxable profits above AED 375,000 shall be subject to 9% rate.
  • ALL MNEs that fall under the scope of Pillar 2 of the BEPS 2.0 framework (i.e. consolidated global revenues in excess of AED 3.15 billion) shall be subject to different rates as per OECD Base Erosion and Profit-Sharing rules. However, until such time as the Pillar Two rules are adopted by the UAE, multinationals will be subject to CT under the regular UAE CT regime.
  • Taxable profits are the accounting profits subject to certain adjustments.

Tax Exemptions and Incentives in Dubai, UAE

The UAE government offers several tax exemptions and incentives to businesses, including:

Tax exemptions for certain industries: The UAE government offers tax exemptions for businesses operating in certain industries, such as extractive businesses.

Double Taxation Avoidance Treaties (DTAs): The UAE has entered into DTAs with several countries to prevent double taxation of income. This means that businesses that are taxed in the UAE may be able to claim a credit against their tax liability in their home country.

The employment income of individuals is not taxable.

Other personal income: Dividend income is exempt. Rental receipts from UAE real estate investments are also not taxable even if UAE real estate and other investments are held through a private or family trust, subject to certain conditions.

Compliance and Reporting Obligations

Businesses are required to comply with several tax compliance and reporting obligations, including:

Maintaining proper financial records: Businesses are required to maintain proper financial records, such as accounting books, invoices, and receipts etc.

Preparing annual financial statements

Businesses are required to prepare annual financial statements that comply with the International Financial Reporting Standards (IFRS) or other applicable accounting standards.

Filing annual returns: Businesses are required to file annual returns with the tax authorities.

Renewing licenses: Businesses are required to renew their licenses with the relevant authorities on a regular basis.

Fulfilling regulatory requirements: Businesses are required to fulfil other regulatory requirements, such as obtaining the necessary permits and licenses.

It is important for businesses in Dubai to understand their specific tax obligations and to comply with all applicable laws and regulations. Failure to do so could result in penalties and other consequences.

Conclusion

Corporate tax in Dubai is a complex and evolving topic. Businesses operating in Dubai should seek professional advice to ensure that they are fully compliant with all applicable laws and regulations.

Here are some additional things to keep in mind about corporate tax in Dubai:

  • The UAE government is constantly reviewing and updating its tax laws. It is important for businesses to stay up to date on the latest changes.
  • The UAE has several tax treaties with other countries. These treaties can affect the amount of tax that businesses owe.
  • The UAE has several tax incentives available to businesses. These incentives can help businesses reduce their tax expense.
  • If you have any questions about corporate tax in the UAE, please contact a tax advisor.

If you are an SPC Free Zone business license holder, you can get in touch with us by calling 800 SPCFZ (77239) if you have queries.

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