The UAE on Friday issued a corporate tax law, under which a 9% tax rate will be applicable on companies posting a profit of over AED 375,000.
Corporate tax will be imposed on profits accrued and not on the total turnover of the business. Also, corporate tax will not be applied to individuals’ salaries or their income from employment. In addition, personal income earned from bank deposits or savings programmes and investments in real estate by individuals in their personal capacity are also not subject to the tax.
The tax will be applicable to businesses in UAE from the financial year commencing on or after June 1, 2023.
Corporate tax on businesses is levied in almost every country in order to diversify the revenues of the governments.
Exemptions
Free zone companies in UAE which fulfill all conditions specified in the Executive Regulations of the UAE Corporate Tax Law will be exempt from corporate tax.
Natural resource extraction activities are also exempted but they’re subject to existing emirate-level taxation. Government entities, pension funds, investment funds and public benefit organisations are also beyond the scope of corporate tax.
The corporate tax shall be imposed on taxable persons which includes residents, certain non-residents and free zone persons generating profits of over Dh375,000 per annum.
The non-residents are also subject to 9% of tax if they have a permanent establishment in UAE as well as income from the sale of goods, provision of services etc. in the country.
