UAE to implement corporate tax from June 2023

Announced in February 2016, the UAE Ministry of Finance announced on 31 January 2022 that a Corporate Tax will be implemented from 1 June 2023.

Who is affected by the new tax?

All Mainland companies are affected by the new tax.

Free zone companies are not affected if they do not operate in the UAE. This point will be clarified in the coming months but it should be noted that a Free zone company that has customers in the Emirates will be subject to corporate tax. The logic is the same as for the VAT liability of a company.

Individuals with a licence or permit (such as freelancers) whose clients are located in the UAE are also affected.

The FTA has set up an FAQ which already indicates some details:

How high will the corporate tax rate be in the UAE?

Two corporate tax rates will be implemented:
– 0% on profits up to AED 375,000 per annum;
– 9% on profits above AED 375,000 per annum.

Dividends, capital gains, royalties and interest remain tax free.

Loss carryforward and loss carryback will be possible. Within a group, losses of one entity will be set off against the profits of another entity.

Tax credits calculated on taxes paid abroad by UAE companies will be available.

What about taxes for individuals?

The new tax only concerns companies. There is therefore no provision for taxation on the income of individuals residing in the Emirates. Salaries, dividends, property rents, etc. received by an individual remain untaxed.

What are the consequences for your company?

We have been assisting all our clients for several years to comply with the legal obligations applicable to their company in the UAE. This new tax will reinforce the importance of accounting, annual auditing of accounts and holding an annual general meeting.

If your company is not up to date on these points, we invite you to contact us so that we can check with you if all the legal obligations (there are now 8 including audit, VAT, ESR notification, etc.) applicable to your company are well respected.