Corporate Tax Advisory Services in Dubai
Tax Consultant in UAE: In light of the recently enacted Corporate Tax legislation. iI has become increasingly essential for businesses to engage the services of premier tax consultants in Dubai. The UAE government has officially announced the implementation of a 9% Corporate Tax effective from June 1, 2023. As per this regulation, businesses and individual taxpayers are obligated to comply starting from their first fiscal year that commences on or after this date.
Companies operating both in the mainland and Free Zones can benefit from consulting with leading tax experts in Dubai to address several crucial aspects, such as:
- Assessing their tax liability status,
- Preparing requisite financial statements and documentation,
- Understanding the taxation landscape for Free Zone companies,
- Gaining insights into the specific tax rates that apply,
- Navigating the complexities around transactions involving related parties or group companies, withholding tax, and allowable expenses,
- Identifying income exemptions and strategies for carrying forward losses.
By availing themselves of specialized tax consultancy services, companies can ensure that they are fully compliant with the new tax laws, thereby mitigating any risks and optimizing their tax obligations.
Objectives of Corporate Taxation in the UAE
The United Arab Emirates aims to achieve several key objectives through the implementation of its Corporate Tax regime, including:
- Sustaining and enhancing its reputation as a leading global hub for trade and investment.
- Reinforcing its commitment to adhering to international tax transparency standards and mitigating the risk of unfair tax practices.
- Accelerating economic growth and facilitating its transition towards achieving strategic national goals.
Scope of Corporate Tax in the United Arab Emirates
The Corporate Tax framework in the UAE is applicable to various entities and sectors, as outlined below:
- Holders of commercial licenses in the UAE, encompassing all companies and individuals engaged in business activities.
- Enterprises operating in free zones: The UAE’s Corporate Tax system will continue to honor existing tax incentives for free zone companies that comply with all legal requisites and refrain from conducting operations on the UAE’s mainland.
- Foreign companies and individuals: The tax regime applies to those conducting business in the UAE on a regular or continuous basis.
- Entities involved in the real estate sector, including those that manage, construct, develop, broker, or operate within the industry.
- Banking Operations: Institutions involved in financial services and banking activities are also subject to the Corporate Tax provisions.
By clarifying the objectives and scope, the UAE aims to create a transparent, fair, and competitive tax environment that aligns with its economic vision and international commitments.
Categories Exempt from Corporate Tax in the UAE
Enterprises with profits exceeding 375,000 AED are generally subject to corporate tax in the United Arab Emirates. However, there are specific categories of businesses and income streams that are exempt from this taxation. Below is a list of these exceptions:
- Personal Income: Individuals are not subject to corporate tax. Hence, any income generated from employment, real estate, stock investments, or other sources not related to conducting a business within the UAE will remain exempt from corporate tax.
- Foreign Investors: Corporate tax is not applicable to foreign investors who do not engage in business operations within the UAE.
- Free Zone Enterprises: Businesses that operate within designated free zones in the UAE may be eligible for tax advantages, provided they comply with all relevant regulatory conditions.
- Capital Gains and Dividends: Corporate tax does not apply to capital gains or dividends derived from qualified shareholdings in UAE-based enterprises.
- Intragroup Mergers and Restructurings: Corporate tax is not levied on qualified mergers and restructurings between companies within the same corporate group.
Please consult with tax professionals for specific advice tailored to your situation on Tax Consultant in UAE
Corporate Tax Structure
As per guidelines from the Ministry of Finance, the structure for Corporate Tax rates in the United Arab Emirates (UAE) is as follows:
- For businesses with a taxable income up to AED 375,000, no corporate tax is applicable.
- A rate of 9% applies to taxable income exceeding AED 375,000.
Methodology for Calculating Corporate Tax in the UAE
In the UAE, the corporate tax rate is calculated as 9% of the net profit, as reported in the company’s audited financial statements. This tax rate is only activated when the taxable net profit exceeds AED 375,000. No corporate tax is levied on net profits up to and including AED 375,000.
Eligibility for Corporate Tax in UAE Free Zones
Pursuant to Article 3 of the Corporate Tax Law, a qualified entity operating in a UAE Free Zone is eligible for a 0% corporate tax rate on qualifying income. Excluding income that falls under exemption categories or is otherwise out of scope, any remaining revenue for such qualified entities is subject to a corporate tax rate of 9%.
As delineated by the relevant legal framework, entities in free zones are not exempt from corporate tax obligations. The applicable tax rate can vary between 0% and 9%, depending on the type of income generated. Compliance with the Corporate Tax Law is mandatory for free zone entities, which are required to complete a series of legal formalities including tax registration, income assessment, annual tax return filing, and payment of due taxes.
Notably, there is no minimum revenue threshold that necessitates corporate tax registration. Even if an entity reported losses or had zero income in the previous financial year, and anticipates no income in the upcoming year, registration for corporate tax remains obligatory.
Terminological Clarifications for Application of Corporate Tax in Free Zones
To ensure proper interpretation and application of the Corporate Tax Law, it is essential to understand specific terminology such as “free zone,” “free zone entities,” “qualified free zone entities,” and “qualifying income.” According to the UAE Corporate Tax Law, a free zone is defined as “a specifically demarcated geographic area within the State, designated by a Cabinet decision upon the advice of the Minister.” Each free zone in the UAE is recognized for corporate tax purposes, subject to confirmation through a Cabinet resolution listing the designated free zones.
Furthermore, a “free zone entity” is described as “a legal entity incorporated, established, or otherwise registered in a Free Zone, which may include a branch of a non-resident entity.” This implies that neither natural persons conducting business in the UAE nor legal entities situated outside a free zone qualify as free zone entities. Eligible free zone entities encompass various legal structures, including but not limited to limited liability companies. Limited liability partnerships, legally-structured funds, public shareholding companies, public joint-stock companies, and branches of non-resident legal entities.
Tax Consultant in UAE, Payment, and Refund Requirements
For each tax period, companies are required to file a single UAE corporate tax return, accompanied by any essential supplementary schedules. Advance filing of provisional corporate tax returns and payments are not required in the UAE. For additional details on administrative requisites, consultation with Dubai-based Corporate Tax Advisors is advised. Mandatory compliance measures include:
- All taxable entities, including those operating in free zones, must register for corporate tax and obtain a corporate tax registration number.
- Certain entities classified as “Exempt Persons” may also be mandated to register for corporate tax, as directed by the Federal Tax Authority.
- Tax returns for each applicable period must be filed by taxable entities within nine months of the period’s conclusion. Any taxes due for the respective tax period should generally be paid by the same deadline.
By adhering to these guidelines and requirements, companies can ensure compliance with UAE’s Corporate Tax Law and minimize legal risks.
Optimize Your Corporate Strategy with Expert Tax Consultant in UAE
As the introduction of corporate taxation in the United Arab Emirates transforms the country’s regulatory landscape, it’s crucial for businesses to be fully prepared to navigate these evolving tax obligations. MP Elites Consulting offers comprehensive tax assessment and advisory services, designed to assist companies in achieving full tax compliance. Our seasoned team of accounting professionals and tax consultants in Dubai have successfully guided hundreds of firms through the complexities of VAT and excise tax. This proven track record positions us as an invaluable resource for businesses striving to meet the requirements of corporate taxation in the UAE.
Our Leading Corporate Tax Consultants in the UAE can address the following critical questions to ensure your business remains compliant:
- Determining if, and by when, your company is required to register for corporate tax;
- Identifying your company’s accounting and tax reporting period;
- Establishing the deadlines for filing your Corporate Tax returns;
- Advising on strategic decisions or applications your company can or should undertake to align with corporate tax regulations;
- Outlining the financial records and data your company must maintain for corporate tax purposes.