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When will the corporate tax be implemented in UAE?

Tax Agent

One of the hottest topics of discussion among businesses and tax professionals these days is corporate tax in Dubai and UAE.

The Ministry of Finance in UAE has announced the introduction of Federal Corporate Tax from 1st June 2023. The motive of the authorities behind the introduction of corporate tax is to incorporate best tax practices globally and minimize the burden of compliance on businesses.

The introduction of corporate tax is also expected to bring a competitive advantage to the country by attracting more foreign investments in the UAE. Besides, it will be beneficial for business owners in the UAE as they will be paying corporate tax rather than paying additional individual income tax.

Given that corporate tax in Dubai is fairly new for businesses, it is essential to understand the concept.

So let us first understand what is corporate tax.

What is Corporate Tax?

Corporate tax is a type of direct tax levied on the net income or profit of corporations and other entities earned from their business. In simple words, it requires companies to pay a certain percentage of profit as corporate tax.

Who is subject to Corporate Tax?

Corporate tax will apply to:

  • All businesses and individuals performing business activities under a commercial license in UAE
  • Foreign businesses and individuals if they run ongoing or regular trade or business in UAE
  • Free zone businesses in UAE
  • Banking operations
  • Businesses engaged in real estate management, construction, development, agency, and brokerage activities

What is the Rate of Corporate Tax in UAE?

The corporate tax rate will be 0% for taxable income up to AED 375,000 and 9% for taxable income above AED 375,000.

Apart from the above, a different corporate tax rate of 15% would apply to large multinationals (having a consolidated global revenue exceeding € 750 million i.e. AED 3.15 billion) that meet specific criteria set with reference to “Pillar Two” of the OECD BEPS project.

Effective Date of Implementation of Corporate tax in Dubai, UAE

As mentioned earlier, the corporate tax will be applicable for financial years starting on or after 1 June 2023. However, the effective applicable date may change depending on the financial year followed by the business.

For companies that adopt a fiscal year starting on 1 June 2023 and ending on 31 May 2024, corporate tax will be applicable from 1 June 2023 (which is the beginning of the first financial year that starts on or after 1 June 2023).

For companies that adopt a calendar year starting on 1 January 2023 and ending on 31 December 2023, corporate tax will be applicable from 1 January 2024 (which is the beginning of the first financial year that starts on or after 1 June 2023).

For ease of understanding, please refer to the table below.

Financial Year End

First Corporate Tax Period

30th June 1 July 2023 – 30 June 2024
31st December 1 January 2024 – 31 December 2024
31st March 1 April 2024 – 31 March 2025

Next Steps for Businesses in UAE

With corporate tax being implemented soon, businesses in the UAE will need to strengthen their accounting, auditing and tax compliance. They will need to prepare themselves for the new tax regime.

How Can Aviaan Accounting Help?

Aviaan Accounting can help you get ready for the new tax regime and transform your business to the corporate tax era in a smooth and phased manner. Our corporate tax team will help you in assessing the challenges and opportunities that the introduction of a corporate tax will bring.

For more information, book a consultation call with us.

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