Corporate tax, also known as business profit tax or corporate income tax, is a direct tax levied on a company’s net income or profit.
Applicability of Corporate Tax in UAE
All business and commercial activities within the UAE’s seven emirates are subject to UAE Corporate Tax, with exceptions including businesses involved in mining or natural resource exploitation and individuals receiving income in a personal capacity. Government entities, charities, and regulated investment funds may also be exempt, subject to specific criteria.
Effective Date
Corporate Tax will be effective for fiscal years beginning on or after June 1, 2023.
Corporate Tax Rates
The tax rates include 0% for taxable income up to AED 375,000 and 9% on income exceeding this threshold. Multinational corporations meeting specific conditions may be subject to the OECD’s Pillar Two rules.
Income not subject to Corporate Tax
Corporate tax will not apply to certain types of income, including employee salaries, dividends, capital gains from asset ownership, and interest earned through bank accounts or savings plans.
Free Zone Corporate Tax Regime
Businesses registered in free zones can enjoy tax benefits but subject to fulfilment of certain conditions.
Registration
Businesses subject to CT must register with the FTA and obtain a Tax Registration Number.
Filing, Payment, and Refund
Businesses should submit one tax return per tax period to the FTA & pay corporate tax due within nine months from the end of tax period. Refunds can be requested if eligible.
Documentation Requirements
Businesses must maintain financial records for compliance, with additional requirements for exempt individuals and audits for free zone persons to comply with UAE CT regime.
AMA Audit offers expert guidance and support to businesses at every stage of the corporate tax compliance process, ensuring adherence to regulations and optimizing tax outcomes. Our services include:
Corporate Tax Eligibility & Exemptions: Analyzing eligibility criteria and identifying potential exemptions to optimize tax obligations.
Tax Grouping Analysis: Evaluating group structures to determine tax implications and optimize tax efficiency.
Tax Implications Assessment & Advisory: Assessing potential tax implications of various business decisions and providing strategic advisory services.
Group Company Restructuring: Assisting with restructuring initiatives to enhance tax efficiency and compliance.
Foreign Tax Optimization: Advising on strategies to optimize tax liabilities for businesses operating internationally.
Corporate Tax Registration: Assisting businesses in the registration process for corporate tax with the relevant authorities.
Taxable Income Computation: Calculating taxable income accurately in compliance with regulatory requirements.
Tax Return Preparation & Filing: Preparing and filing tax returns efficiently to meet regulatory deadlines.
Tax Document Preparation: Compiling and organizing necessary tax documentation in accordance with regulatory standards.
Tax Deregistration: Facilitating the deregistration process for businesses no longer subject to corporate tax obligations.
• CT Impact Assessment
The UAE for numerous years, has been positioning itself as one of the most desirable location for international business and investors with nil tax rates and lower tax compliances. With the implementation of the corporate tax in the UAE, the business registrations, corporate formations and upcoming acquisitions will probably be impacted. For preparing to effectively manage UAE corporate tax, one must have their firm appraised and make the required modifications. For the best tax consultants, AMA can assist you for impact assessment services.
• CT Registration, De-Registration
With the UAE government’s announcement of implementing corporate tax starting from the financial year 2023, the tax compliance landscape in the country is poised to undergo a paradigm transformation. Businesses operating in the UAE have been obliged to assess their corporate tax eligibility and compliance requirements such as tax registration, deregistration, filing of tax returns and payment, among other things.
The registration under the UAE Corporate Tax law can be either voluntary by the taxpayer themselves or the FTA has the power to directly register a qualifying person under the UAE Corporate Tax law if they fail to register themselves Suo-moto, even though they might be so required. Businesses that fall under the ambit of UAE corporate tax are required to carry out registration with the FTA and obtain the Tax Registration Number within the prescribed period specified by the regulatory body.
In the event of cessation or liquidation when the business ceases to be subject to corporate tax, they are required to apply for tax deregistration. A deregistration application needs to be submitted to the FTA within three months from the date of cessation or discontinuation.
Deregistration request will be approved by the FTA only if it is satisfied that the business has filed corporate tax returns and paid due taxes and settled all the corporate tax liabilities and penalties (if any) that were due for all periods up to and including the date of cessation. If a business fails to apply for corporate tax deregistration within the timeframe stipulated by the FTA or fails to comply with the payment and filing obligations, FTA has the power to deregister the business based on the information available at its disposal.
• Tax Planning & Advisory
Tax always comes into the forefront in almost every facet of the business. Tax advice needs to be sought before you enter into business transactions, to avoid surprise losses related to tax. Hence, tax planning should always be developed in advance. However, certain transactions may have been undertaken without proper tax planning or even without any tax planning at all.
In such situations, one would need to identify tax risks and find ways to mitigate them. It would be better if you could provide us with relevant draft agreements as it would help us better understand your business and, in particular, the envisaged transaction and thereby identify the relevant tax implications, and recommend ways to mitigate the relevant tax risks.
You may also discuss with our team at AMA, the transactions or deals that you have undertaken but about which you are uncertain of the tax implications. Our tax experts at AMA will identify the tax risks and recommend ways to mitigate them.
• Tax Accounting & Provisioning
International Accounting Standard 12 Income Taxes (IAS 12) requires companies to measure deferred tax assets and liabilities at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
Based on the above, companies have to assess the deferred tax implications and the estimated deferred tax [Deferred Tax Assets (DTA) / Deferred Tax Liabilities (DTL)] for reporting periods, including interim reporting.
With the right approach, our team of finance and accounting professionals along with the subject matter experts from the corporate tax team will assist you in quarterly and annual tax provision calculations, reviewing tax balance sheet accounts and related deferred tax provisioning computations.
• CT Filing & Refund
The Corporate Tax Return is a form filed by the Taxable Person for a specific tax period containing the details of income and expenses reported in the financial statements/records, along with supporting schedules and computation showing the Corporate tax liability and other necessary information required by the FTA from time to time. The Tax Return should be filed within a specific period with the tax authority according to the Corporate Tax Law.
AMA has highly knowledgeable and experienced Tax consultants in UAE in assisting clients with the best Corporate Tax services in UAE for Corporate Tax returns, ensuring staying compliant with the laws and regulations of the Tax Authority. Our team will also guide you through document preparation, calculating the tax liability, and tax compliance for Corporate Tax activities such as Registration, filing returns, refunds, etc.
• CT Audit
A corporate Tax Audit in UAE is a mandatory process to audit the tax liability, Tax compliance and financial records of companies that meet the conditions. An auditor reviews the financial statements, tax returns, and documents to identify any discrepancies or errors during the process.
In order for the governing body to determine whether a taxable organization is adhering to the Corporate Tax law and standards as per FTA guidelines, corporate tax audits are carried out and submitted to the government. It is mandatory for all companies to adhere to this Corporate Tax Law and Audit procedures. The FTA investigates if the taxable companies have settled all debts and that all taxes are due to have been collected and paid to the authorities within the time limit specified through the tax audit. The purpose of a corporate tax audit is to ensure that companies are paying the correct amount of tax and following the regulations set by the FTA in the UAE. Companies that fail to comply with tax regulations may face Corporate Tax penalties or legal action.
