In the wake of the UAE’s implementation of new corporate tax legislation, many businesses are grappling with the complexities of compliance. Our dedicated team of tax experts stands ready to guide you through every step of this journey, ensuring your business understands its obligations, maximizes available exemptions and reliefs, and meets all compliance deadlines to sidestep potential penalties.

Essential Compliance Steps for UAE Businesses

Understanding the fundamentals is crucial. Every business in the UAE must adhere to three key requirements to comply with the new corporate tax scheme:

1. Registration for Corporate Tax: Starting from June 2023, all businesses must register for corporate tax with the Federal Tax Authority (FTA).

2. Maintaining Accounting Standards: Businesses need to keep meticulous accounting records up to the required reporting standards, such as the International Financial Reporting Standards (IFRS).

3. Filing Corporate Tax Submissions: An obligatory step involves filing corporate tax submissions with the FTA, ensuring adherence to reporting deadlines.

While not all businesses are liable to pay corporate tax, registering and complying with these steps is mandatory to assess eligibility for tax exemptions.

Our Comprehensive UAE Corporate Tax Services

At every stage of the process, our team provides expert assistance tailored to your business needs:

• Corporate Tax Advice: Our seasoned experts offer comprehensive advice on all corporate tax considerations affecting your business, including available exemptions and strategies for optimization.

• Corporate Tax Registration: We streamline the registration process, assisting your business in registering for corporate tax with the FTA and managing all associated deadlines efficiently.

• Corporate Tax Returns: Our team conducts a thorough assessment of your corporate tax position, ensuring optimal tax outcomes and handling all necessary submissions with the FTA throughout the year.

Understanding Corporate Tax in the UAE

Corporate tax is levied on the taxable income (net profit) of business entities residing in the United Arab Emirates. The new taxation policies came into effect on June 1, 2023, with most companies becoming fully taxable by January 1, 2024.

Background and Economic Context

Historically, the UAE has been renowned for its business-friendly environment, featuring a 0% corporate tax regime. However, the introduction of corporate tax reflects the nation’s evolving economic landscape, aiming for diversification and sustainability beyond oil revenues.

Differentiating Corporate Tax from VAT

It’s essential to distinguish corporate tax from Value Added Tax (VAT). While VAT applies only once businesses reach certain thresholds and is collected from customers at the point of sale, corporate tax is mandatory for all businesses based on their taxable income.

Entities Subject to Corporate Tax UAE

The scope of corporate tax in the UAE encompasses:

• Corporations and legal entities resident or primarily operational within the UAE.
• Individuals engaged in business activities within the UAE.
• Foreign legal entities with a Permanent Establishment in the UAE.

Tax Rates and Tiers

The UAE’s corporate tax structure features three tiers:

1. Businesses with net yearly profits up to AED 375,000: Subject to a 0% tax rate.
2. Businesses with net yearly profits above AED 375,000: Subject to a 9% tax rate.
3. Large multinational companies: Subject to a minimum of 15% corporate tax if their total global revenue exceeds EUR 750 million.

Navigating Exemptions and Deductions

Various entities and income sources may qualify for exemptions or deductions, including:

• Governmental entities and public institutions.
• Businesses engaged in natural resource extraction within the UAE.
• Charitable and social organizations meeting specific criteria.
• Real estate and regulated investment funds.
• UAE companies fully owned and controlled by the government.
• Public or private pension or social security funds.

Special Provisions for Freezone Entities, Freelancers, and Groups

• Freezone Entities can qualify for a 0% tax rate under specific conditions, emphasizing qualifying income and economic substance.
• Freelancers operating under their own name are subject to corporate tax once annual revenue exceeds AED 1 million.
• Groups of taxable entities meeting specific criteria can establish a Tax Group for consolidated tax considerations.

Administration and Compliance

The UAE Ministry of Finance entrusts the Federal Tax Authority with administering corporate tax regulations, ensuring compliance and regulatory oversight.

Filing and Reporting Obligations

Businesses must register with the FTA for tax filing purposes, submitting corporate tax returns annually within nine months of the financial year-end.

Implications and Economic Context

The introduction of corporate tax enhances the UAE’s economic diversification efforts, making the nation more attractive to foreign investors. Despite the implementation of corporate tax, the UAE maintains competitive tax rates compared to regional and global counterparts.

Conclusion

Navigating the intricacies of UAE corporate tax requires expertise and diligence. Our team at Horizen offers tailored solutions to ensure your business remains compliant, optimized, and poised for success in the evolving tax landscape.

Reach out to Horizen Light today to embark on a journey of seamless tax compliance and strategic tax management.