UAE Corporate Tax : The UAE has adopted a corporate tax, which will have a significant impact on the majority of UAE firms. Our corporate tax team at Saif Chartered Accountants can answer your questions regarding this important new law.
The UAE has introduced a Corporate Income Tax (CIT) for businesses in the country. The CIT is effective as of June 2023 and will be applicable to financial years beginning on or after that date. Transfer pricing and documentation requirements will apply to UAE businesses in reference to the OECD Transfer Pricing Guidelines.
Saif Chartered Accountants is a tax agent approved by the FTA with over 29 years of combined experience. A member firm of SGA World International, the company has global exposure and will be able to assist companies once CT is implemented.
Uae Corporate Tax- Effective Date For Financial Years Starting On Or After 1 June 2023.
The UAE Corporate Tax on Free Zone Companies includes the Dubai Multi Commodities Centre (DMCC)
UAE Corporate Tax is generally applicable to Free Zone entities includes DMCC. However, the UAE Corporate Tax regime will honor the tax incentives currently being offered to free zone entities if they satisfy two conditions:
- If such entities maintain the adequate substance in the Free Zone and
- If it complies with all regulatory requirements.
The Ministry of Finance released a public consultation document on the proposed UAE Corporate Tax on April 28, 2022. The document states that companies registered in the Free Zones are known as Free Zone Persons (FZPs), and such FZPs will be within the scope of the new tax. These FZPs are required to file their Tax Return annually.
How Corporate Tax in the UAE applies to different types of transactions in a Free Zone Entity
- Transactions done by a Free Zone company to a business located outside the UAE will be taxed at 0%. That means there is no tax on the profit earned from outside the UAE by a Free Zone company.
- Tax on profits from trading in the same Free Zone will be 0%. Similarly, profits earned through trading with entities in another Free Zone in the UAE will also be exempt from tax.
- If the Free Zone Person has a branch on the mainland, 9% Corporate tax will be applicable for its mainland sourced income at the branch. However, only 0% tax will be applicable for all of its other income sources at the branch.
- If a Free Zone resident does not have a branch on the mainland, he or she can still have 0% tax levied on passive income from the UAE mainland. Passive income includes interest, royalties and dividends, and capital gains earned from owning shares in UAE companies on the mainland.
- A number of firms registered in the Free Zone have group companies on the mainland. Income from transactions with mainland group companies will be tax-free; however, payments made to a Free Zone Person by a mainland company will not be deductible expenses for that company. In other words, indirectly it will be taxed at 9%.
- Businesses located in Free Zones that sell goods to UAE mainland businesses and those businesses are the importers of those goods on records will be taxed at 0 percent Corporate Tax.
- If a Free Zone person located in a designated zone sells goods to the UAE mainland business, and the importer of those goods is listed on the records as an entity registered in the UAE, then no tax will be due on that transaction.
- SAIF Chartered Accountants, approved DMCC auditor; is committed to providing you with up-to-date information on the introduction of corporate tax. Our goal is to help you make an informed decision about your business.