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Corporate Tax Consultant in Dubai, UAE

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Corporate Tax Consultant in Dubai, UAE

As Corporate Tax Consultants in Dubai, UAE, we provide the following services in this regard:

  1. Corporate Tax Advisory services:

As Corporate Tax Consultant, we assess the applicability and impact of Corporate Tax implementation in Dubai, UAE on business and Free Zone (including FFZ) entities. We advise on withholding taxes and exemptions that can be availed. Further, we advise on Corporate Tax for transactions pertaining to group entities and the various risk areas and challenges faced by taxpayers.

  1. Compliance Services:

As part of compliance services, we assist in registration for Corporate Tax and computation of taxable income subject to Corporate Tax in Dubai, UAE. Subsequently, we assist in the computation of tax liability and timely preparation and filing of tax returns.

  1. Representation services:

As part of Representation services, we help our clients by preparing the written submissions to be furnished, filing of response against the notices received, filing of written appeal against the adverse tax adjustments made or penalty imposed by the tax authorities in respect of Corporate Tax implementation in Dubai, UAE. We further represent our clients before tax authorities thereby enabling them to focus on their businesses.

Historically, many businesses in the UAE have enjoyed zero income tax on their profits. UAE’s tax-free statute is however set to change soon with the announcement of Federal Corporate Tax.

In order to adapt to the constantly changing international tax rules to provide greater transparency and comply with regulations in an effective manner, the Ministry of Finance of the United Arab Emirates (UAE) has proposed and subsequently decided to introduce Corporate tax with the lowest tax rates at the global level. This will come into force from 1st June 2023 and will be applicable for all the subsequent financial years.

Federal Tax Authority (FTA) will be responsible for the administration, collection and enforcement of corporate tax in UAE.

Corporate tax in Dubai, UAE comes as an entirely new addition to the existing taxes in the country. Many small, medium and large businesses will therefore find the necessity for corporate tax services by corporate tax consultants in Dubai, UAE. Corporate Tax Implementation in Dubai, UAE will enable companies to level up to the road ahead in bringing them under the corporate tax purview, while lowering regulatory burdens for firms and start-ups.

Why Corporate Tax in Dubai, UAE?

Corporate Tax Implementation in Dubai, UAE has been proposed for various reasons. A few of them have been highlighted below:

  • To increase the status of Dubai, UAE as a major commercial and investment centre in global eyes
  • To effect and speed up the development and transformation in Dubai, UAE to meet its strategic goals effectively
  • To comply with transparency regulations in international trade
  • To minimize the dependency on oil as a major revenue source
  • Reaffirm its commitment to preventing harmful tax practices

Scope of Corporate Tax in UAE:

The scope of corporate tax in UAE is somewhat widespread covering major businesses. These include:

  • Businesses incorporated in Free zones and not operating or conducting business with the Dubai, UAE mainland.
  • All businesses incorporated in Dubai, UAE except those involved in the production of natural resources
  • Banking sector except branches of foreign banks. 

Corporate tax implementation in Dubai, UAE:

Corporate tax in UAE will be applicable on the net income or profit of corporations and other entities from their business. It is applicable for financial years starting on or after June 1, 2023.

  • For businesses that follow a fiscal year starting on June 1, 2023 and ending May 31, 2024, it will be effective from June 1, 2023.
  • For businesses that follow the calendar year starting January 1, 2023 and ending December 31, 2023, it will be effective from January 1, 2024.

The same is payable on the profits of UAE businesses as reported in their financial statements complying with the international accounting standards and having minimal exceptions and adjustments.

Corporate tax will be levied on all corporations as well as commercial activities in the UAE with a few exceptions.

Income exempted from Corporate Tax in Dubai, UAE:

The following incomes are exempt from the Corporate tax and are therefore not subject to CIT

  • Income from Dividends earned by overseas investors and qualified shareholdings obtained by a Dubai, UAE firm (yet to be defined in the law)
  • Income arising due to interest, royalties, capital gains, and other investment gains earned by overseas investors
  • Qualifying intra-group transactions and reorganizations as far as the conditions are met
  • Income arising on account of natural resource exploitation
  • Profit of Branches of Foreign banks
  • Foreign businesses and individuals if there is no continuous or frequent business activity in the UAE
  • A Dubai International Financial Centre (DIFC ) or Abu Dhabi Global Market (ADGM) incorporated firm.
  • Individuals having income generated from employment, real estate, investment in shares or other personal income not associated with Dubai, UAE trade or business. However, business income earned by an individual holding a commercial license and income earned by a freelance professional with a permit will be subject to Corporate Tax in Dubai, UAE.

Proposed Corporate Tax Rates in Dubai, UAE:

The Corporate Tax rate in Dubai, UAE has been classified into various slabs and a certain percentage of Dubai, UAE corporate tax rate has been specified for each slab. Accordingly, for taxable income up to AED375,000, the tax rate is nil, and a 9% tax rate applies for taxable income over AED375,000. It may be pertinent here to note that AED375,000 = US$102,095. Further, Large Multinational corporations with a consolidated global revenue exceeding € 750 million (AED 3.15 billion) subject to OECD Base Erosion and Profit-Sharing laws Pillar 2 of the BEPS 2.0 framework will be entitled to different rates.

Taxable Income Corporate Tax Rate
Up to AED 375,000 Nil
Above AED 375,000 9%

For example, if XYZ Company’s taxable income is AED 500,000 for a financial year then their corporate tax liability will be calculated in the below manner:

  • Taxable income up to AED 375,000 @ 0% = AED 0
  • Taxable income exceeding AED 375,000 (i.e. AED 500,000 – AED 375,000) AED 125,000 @ 9% = AED 112,50

Therefore, total tax liability of XYZ Company = AED 112,50

Corporate Tax Return

All businesses in the UAE will have to file a corporate tax return annually and through an electronic mode of filing. Failing to do so can attract severe penalty.

Corporate Tax Period and Return Filing Due Date

The corporate tax period will vary depending on the financial year end followed by the entity.

Entities With Financial Year Ending First Corporate Tax Period CT Return Filing and Payment Due Date
30 June 1 July 2023 – 30 June 2024 31 March 2025
31 December 1 January 2024 – 31 December 2024 30 September 2025
31 March 1 April 2024 – 31 March 2025 31 December 2025

Note: The UAE corporate tax returns must be filed and payment must be made within 9 months of the respective tax period.

Corporate tax in Dubai, UAE impact analysis

Dubai, UAE is considered as a tax haven for businesses and foreign investments. However, this tax haven is now about to implement Corporate Tax. Although one may say that this move might discourage investment and cease to attract international corporations, the corporate tax in Dubai, UAE is one of the world’s lowest corporate tax rates at the global level. With this competitive tax policy, Dubai, UAE may still be a desirable location for multinational companies levelling themselves up to transparency and dynamic international practices.

Once the implementation of Corporate Tax in Dubai, UAE takes effect, there is bound to be a major change that is expected in the tax and compliance outlays of most Dubai, UAE businesses. The new regime requires accurate identification of tax implications to the specific corporate structure of the entity and entities must be compliant with this new tax regime.

Businesses registered in Free Zones and not operating a business with the mainland will be getting the benefit of corporate tax incentives depending on the respective regulations and an annual return is required to be submitted for all free zones.

The impact of the implementation of Corporate tax in Dubai, UAE is not just restricted to this but also extends to corporate mergers and acquisitions. The government’s objective in the implementation of corporate tax is to restructure the economy of Dubai, UAE by reducing its dependency on oil and gas and establishing itself in the field of digitalization and technology.

Aviaan Accounting – Corporate Tax Consultant in Dubai, UAE

The implications of the new corporate tax regime can be far-reaching and therefore it is advisable that the tax and finance teams should work on preparing a roadmap for better adoption. In order to accurately access the implications, businesses need to have a sound understanding of the proposed changes.

It may require major changes in the business model, legal structure, organizational structure, accounting and profit, contracting and transfer pricing, business processes and much more. Therefore, the implementation of corporate tax regime is bound to require proper support from tax experts. A seasoned tax professional can help you assess the potential impact of corporate tax on your business and overall economy besides helping you adopt the same in a compliant manner.

It’s time that businesses gear up and prepare for corporate tax compliances early on in order to reduce the last-minute pressure on internal teams and avoid higher implementation costs.

If you are looking for an expert Corporate Tax Consultant in Dubai, UAE, get in touch with Aviaan Accounting. We have a team of dedicated tax experts who have in-depth experience in corporate tax matters. We can support you throughout your readiness journey as well as at every stage during the corporate tax implementation process. We will handhold you to ensure that you will be 100% ready to comply with corporate tax.

Our highly qualified tax professionals can assist you with potential restructurings, valuation considerations and pre-deal preparation along with negotiating strong tax indemnities and covenants in UAE transaction documents once the corporate tax is fully implemented.

Phases Approach Action Plan
Phase 1 Impact Assessment Evaluating and preparing your business for the new regime.

– Evaluating revenue and expense transactions for accessing corporate tax relevance

– Reviewing technical aspects like related party / intra-group transactions, deductibles, transfer pricing, etc.

Phase 2 Assessment and Planning Performing a quantitative impact assessment and building a preliminary roadmap for change.

– Perform a detailed assessment

– Identify potential risks and exposures

– Suggest the ideal reporting strategy i.e. whether to opt for a separate entity or group filing.

Phase 3 Implementation support Implementing corporate tax regime and monitoring it.

– Developing and accessing business plans, capital structure, debt capacity, etc.

– Implementing tax reduction measures i.e. depreciation, interest, director’s compensation, etc.

– Periodic monitoring and reporting of the restructuring progress

Phase 4 Post-implementation support Extending ongoing support.

– Providing post-implementation support

– Providing ongoing tax advisory

– Assisting in preparing and submitting tax returns

– Communicating and dealing with the tax office

– Helping in preparing appeals

Our Corporate Tax Services

We work in a phased approach to ensure that the entire process is smooth and satisfactory for you.

FAQs

  • Which type of businesses are subject to corporate tax in Dubai, UAE?

Corporate tax applies to all UAE businesses and commercial activities except for the extraction of natural resources, which is still subject to Emirate level taxation.

  • Does UAE corporate tax apply to individuals doing business as sole proprietors?

UAE corporate tax applies to any individual that conducts regular trade or business in the UAE. Thus, an individual who has a commercial license to conduct business in UAE shall attract corporate tax.

  • Does UAE corporate tax apply to companies set up in free zones?

Companies set up in free zone are subject to corporate tax and hence are required to comply with the regulations. However, companies in the free zone that do not conduct business with mainland UAE and comply with all other regulations will continue to receive incentives currently being offered to them.

  • Who is responsible for the administration and collection of corporate tax in UAE?

Federal Tax Authority will be responsible for the administration, collection and enforcement of corporate tax in UAE.

  • How is taxable income calculated for UAE corporate tax determination?

The taxable income for the purpose of determining corporate tax in UAE is calculated after making specified adjustments or exceptions to the accounting net profit of UAE businesses as reported in their financial statements. Tax losses can be carried forward to subsequent fiscal years and set off against the taxable income for the respective year.

  • Is UAE corporate tax applicable to businesses in each Emirate?

The corporate tax in UAE is a Federal tax and will therefore apply across all Emirates.

  • How do I determine if my business falls within the scope of UAE corporate tax?

The UAE government considers all the activities undertaken by a legal entity as “business activities” and hence fall within the scope of UAE corporate tax.

  • Does UAE corporate tax apply to industries engaged in the oil and gas sector and other extractive industries?

No, UAE corporate tax does not apply to industries engaged in the oil and gas sector and other extractive industries. They will be subject to Emirate level corporate taxation.

  • Does UAE corporate tax apply to the banking sector?

Yes, banking operations, including those currently taxed at the Emirate level, will be subject to the UAE corporate tax.

  • Will I be able to set off my losses from periods prior to the implementation of UAE corporate tax with my future taxable income?

Tax losses incurred prior to the implementation of UAE corporate tax will not be allowed to be set off against future taxable income. Only losses that are generated during and after the first UAE corporate tax period can be carried forward and offset against future taxable income.

For enquiries, E-mail: info@aviaanaccounting.com

 

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