Decoding Dubai Corporate Tax: Everything You Need To Know, A Comprehensive Guide.

Decoding Dubai Corporate Tax: Everything You Need To Know, A Comprehensive Guide.

Dubai, the vibrant and continuously growing city in the United Arab Emirates, has become a central global business hub, attracting entrepreneurs and corporations worldwide. Understanding the corporate tax system is essential if you are a business owner or an investor in Dubai. 

The United Arab Emirates (UAE) is a dream destination for businesses of all sizes, thanks to its favourable tax regime. However, in June 2023, the UAE introduced a new corporate tax regime, which applies to all businesses with taxable income above AED 375,000.

This blog article will take a detailed look at the new Dubai corporate tax regime, including the tax rates, taxable income, and tax filing requirements. We will also discuss some new rules for businesses operating in Dubai.

Dubai Corporate Tax – 01/06/2023

On June 1st 2023, The UAE initiated the implementation of a 9% business tax, which aims to enhance its non-oil revenue and maintain its position as a leading regional commercial hub. The Tax gives immunity to numerous free zones vital to the country’s economy, ensuring their continued contribution to its growth despite the tax reform. 

The UAE Corporate tax is 9%. However, there is a 0% tax rate for taxable income below AED 375,000.

The application for UAE Corporate Tax begins on the Tax period commencing on June 1st 2023, and it focuses on the profit derived from the sale of goods and services. This legislation encompasses the taxation of business profits earned by UAE Residents, whether within or abroad. It applies to both corporate entities and individuals. 

Nonetheless, specific types of income are immune from corporate Tax. In cases where foreign profits are subject to taxation in the UAE, the liability for UAE Corporate Tax will be diminished by the amount of Tax paid in the foreign country on taxable income within the UAE.

Key Implications Of The New Dubai Corporate Tax.

Introducing the new Dubai corporate tax regime has some key implications for businesses operating in Dubai. These include:

  • Increased compliance cost: Businesses must incur additional charges to ensure compliance with the new regime. These costs may include the cost of hiring a tax advisor, the cost of software to help with tax compliance, and the cost of training staff on the new regime.
  • Reduced Profits: The new tax regime will reduce the profits of businesses with taxable income above AED 375,000. Companies will now have to pay Tax on their earnings, whereas they previously did not.
  • Increased Competition: The new tax regime may increase competition in the UAE market. Businesses may now be more likely to relocate to the UAE to take advantage of the lower tax rates.

Prerequisites for Tax Practitioners / Tax Professionals.

The Federal Tax Authority (FTA) recently introduced a fresh set of guidelines for tax practitioners, effective January 1st, 2023. These updated requirements encompass the following aspects:

Continuing Professional Education (CPE): Tax practitioners must now fulfil 40 hours of Continuing Professional Education every two years.

Professional Code of Conduct: Tax practitioners must strictly adhere to a professional code of conduct.

Moreover, the FTA has announced the establishment of a Tax Practitioners’ Council, responsible for overseeing the regulation of tax practitioners within the United Arab Emirates (UAE). This council will comprise representatives from the FTA, the accounting profession, and the business community.

The primary objective behind implementing these new prerequisites for tax practitioners is to ensure they possess the essential knowledge, skills, and experience required to deliver top-notch tax advice to businesses operating in the UAE. These requirements also serve to safeguard the general public from unscrupulous tax practitioners.

What are the Corporate Tax Exemptions?

The following businesses will be exempt from Dubai Corporate Tax:

  • Government Entities
  • Non-profit organisations 
  • Firms with a Net profit below AED 375,000

Businesses subject to Dubai corporate tax must file an annual tax return with the UAE Ministry of Finance. The tax return must be filed by the end of the calendar year following the tax year.

What are the penalties for non-compliance with Dubai Corporate Law?

Businesses that fail to comply with Dubai Corporate Tax Laws may be subject to several penalties, including:

  • Late Payment Penalties 
  • Interest on unpaid taxes
  • Criminal Prosecution

How is Corporate Tax in Dubai Calculated?

Corporate Tax in the UAE is calculated at a rate of 9% of the net profit of a business. The net profit is calculated after eliminating all allowable expenses and exemptions.

Companies liable for corporate Tax in the UAE must submit an annual tax return to the Federal Tax Authority (FTA). This tax return must be filed by the conclusion of the calendar year after the tax year.

You should consult a qualified tax advisor if you have any questions about corporate Tax in the UAE.

Some Additional details – Dubai Corporate Tax.

Here are some additional things to keep in mind about corporate Tax in the UAE:

  • The UAE has a territorial tax system, meaning businesses are only taxed on their UAE- sourced income.
  • The UAE has a double taxation treaty with many countries, which can help reduce businesses’ taxes. 
  • The UAE has several business incentives, such as tax breaks and grants, that can help reduce business costs.

The UAE is a relatively tax-friendly country, and the corporate tax system is designed to be straightforward. If you are considering setting up a business in the UAE, you should carefully consider the corporate tax implications.

Conclusion: JAKS

Dubai’s corporate tax system offers numerous advantages for businesses, with most companies enjoying a tax-free environment. Understanding the intricacies of Dubai Corporate Law, including tax residency, Free zones, VAT, and transfer pricing, is crucial for local and international businesses. By staying informed and engaging in effective tax planning, companies can navigate the tax landscape in Dubai while optimising their operations and remaining compliant with the law.

Remember, it is always advisable to consult with tax professionals or legal experts who specialise in Dubai Corporate Law to ensure accurate interpretation and application of the tax regulations for your business needs.

Looking for concerns regarding Dubai Corporate Tax Law? Look up JAKS. We can help with your Corporate Tax related requirements and needs. Contact us at 

+971 547286723 or mail us at [email protected] to book a consultation session with our experts to discuss your tax-related queries. 

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