The Federal Decree-Law No. (47) of 2022 on the Taxation of Corporations and Businesses (hereinafter referred to as the “Corporate Tax Law”) was issued by the UAE, on 09 Dec 2022.
The CT law provides the legislative basis for the introduction and implementation of a Federal CT in the UAE and is effective for financial years starting on or after 1 June 2023.
The introduction of CT is intended to help the UAE achieve its strategic objectives and accelerate its development and transformation. The certainty of a competitive Corporate Tax regime that adheres to international standards, together with the UAE’s extensive network of double tax treaties, will cement the UAE’s position as a leading jurisdiction for business and investment.
CT Applicability :
The Corporate Tax Law taxes income on both a residence and source basis. The applicable basis of taxation depends on the classification of the Taxable Person.
A taxable person can be either a
● Resident Person
● Non-Resident Person
CT Rates :
Corporate Tax shall be imposed on the Taxable Income at the following rates:
● Taxable Income exceeding AED 375,000 9%
● Taxable Income not exceeding AED 375,000 0%
(this amount is to be confirmed in a Cabinet Decision)
CT Exempt Persons :
Following Persons are exempted from CT,
● Government Entity and Government – Controlled entities
● Persons engaged in Extractive and Non-Extractive Business
● Qualifying Public Benefit Entity
● Qualifying Investment Funds
● Public or Private pension or social security funds
CT Deductions :
Certain expenses which are deductible under general accounting rules may not be fully deductible for Corporate Tax purposes. These will need to be added back to the Accounting Income for the purposes of determining the Taxable Income.
Deductible Expenditure is expenditure incurred wholly and exclusively for the purposes of the Taxable Person’s Business that is not capital in nature.
● Proportional Deductible Expenditure
● Partial Deductible Expenditure
● Non-deductible Expenditure
CT for Free Zones :
Free zones offer 100% exemption from Corporate Taxes and Income taxes, Custom duties. Free Zones have independent laws and regulations.
Qualifying Free Zone Person
In order to be considered a Qualifying Free Zone Person, the Free Zone Person must:
a) Maintains adequate substance in the State.
b) Derives Qualifying Income as specified in a decision issued by the Cabinet.
c) Has not elected to be subject to Corporate Tax.
d) Complies with Arm’s length Principle and Transfer Pricing Documentation.
CT Penalties :
Corporate Tax assessments and penalties shall be in accordance with the Tax Procedures Law and the decisions issued in the implementation of its provisions.
For More information about CT, click here…
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