The UAE Corporate Tax regime will become effective for financial years starting on or after 1 June 2023. Introducing a CT regime is to preventing harmful tax practices.
OVERVIEW OF CT:
What is Corporate Tax?
Corporate Tax is a form of direct tax levied on the net income or profit of corporations and other businesses. It is sometimes also referred to as “Corporate Income Tax” or “Business Profits Tax” in other jurisdictions.
Introducing a CT regime reaffirms the UAE’s commitment to meeting international standards for tax transparency and preventing harmful tax practices.
When will the UAE CT become effective?
The UAE CT regime will become effective for financial years starting on or after 1 June 2023.
- A business that has a financial year starting on 1 July 2023 and ending on 30 June 2024 will become subject to UAE CT from 1 July 2023.
- A business that has a financial year starting on 1 January 2023 and ending on 31 December 2023 will become subject to UAE CT from 1 January 2024
CORPORATE TAX RATES :
The Corporate Tax Rates are applicable based on the below table :
For Example :
- Taxable income of AED 0 – AED 375,000 at 0% = AED 0.
- If a business has earned taxable income of AED 400,000, then AED 400,000 – AED 375,000 = AED 25,000 at 9% = AED 2,250.
What is meant by “large” multinationals?
A multinational corporation that operates in its home country, as well as in other countries through a foreign subsidiary, branch or other form of presence / registration. Merely earning income from outside its home country without a foreign presence or registration would not make a business a multinational corporation.
In the context of the global minimum effective tax rate as proposed under ‘Pillar Two‘ of the OECD Base Erosion and Profit Shifting project,” large” refers to a multinational corporation that has consolidated global revenues in excess of EUR 750m (c. AED 3.15 bn)
CT Subject to Individual :
- Business income earned under a commercial license will be within the scope of UAE CT.
- The investment in real estate by individuals in their personal capacity should not be subject to UAE CT provided the individual is not required to obtain a commercial license or permit to carry out such activity in the UAE.
- Individuals will not be subject to UAE CT on dividends, capital gains and other income earned from owning shares or other securities in their personal capacity.
- Interest and other income earned by an individual from bank deposits or saving schemes will not be subject to UAE CT.
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