Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses was released by the Ministry of Finance (MoF) of the United Arab Emirates (UAE) on 9 December 2022, to establish a new corporate tax system in the UAE. The new corporate tax system will come into effect for financial periods commencing on or after 1 June 2023
Dubai was considered tax heaven, but now this amendment in taxation came as a totally modified agenda of taxation. It establishes the legal basis for corporation taxation on business profits in the UAE.
The UAE Govt. regularizes the new tax rate on Corporate business, which will come into effect on or after 1st June 2023. This Corporate tax will be levied at the rate of 9% for Taxable business Profits Exceeding AED 375,000 (Rs.84,22,986 Appx).
Imposition of Corporate Tax
UAE Corporate Tax shall be imposed on Taxable Income, at the rates determined under this Decree-Law, and payable to the Authority under this Decree-Law and the Tax Procedures Law.
Corporate Tax Rate
1. Corporate Tax shall be imposed on the Taxable Income at the following rates:
a) 0% (zero percent) on the portion of the Taxable Income not exceeding the amount specified in a decision issued by the Cabinet at the suggestion of the Minister.
b) 9% (nine percent) on Taxable Income that exceeds the amount specified in a decision issued by the Cabinet at the suggestion of the Minister.
2. Corporate Tax shall be imposed on a Qualifying Free Zone Person at the following rates:
a) 0% (zero percent) on Qualifying Income.
b) 9% (nine percent) on Taxable Income that is not Qualifying Income under Article 18 of this Decree-Law and any decision issued by the Cabinet at the suggestion of the Minister in respect thereof.
Who is exempted from this tax?
Profits up to and including that threshold will be taxed at zero percent to support small businesses and startups. Also, these Tax Rates do not apply to Salary, interest, or other personal Income. Also, Income from saving programmes and investment in real estate by individuals in a personal capacity is not subject to Tax.
Government entities, pension funds, investment funds, and public benefit organisations are exempt from this Tax.
For information regarding tax issues in the UAE, send an email to [email protected]