Corporate Tax 2023 – United Arab Emirates

By | January 5, 2023

Recently, the authorities of the United Arab Emirates (UAE) announced that the corporate tax will get introduced from 1st June,23 in the country. As expected, this news has created a buzz among businesses and tax professionals. Interestingly after this, the UAE will become 4th among the GCC countries to introduce a federal corporate tax. If you don’t know, the introduction of federal corporate tax in the UAE aims to further strengthen the position of the country. 

Corporate Tax in UAE

The UAE will accelerate the strategic objective of the country towards development and transformation. As a result, the UAE will become a world-leading hub for businesses and investment. Also, the corporate tax concept avoids harmful tax practices and helps meet international standards for tax transparency. However, corporate tax is still new in UAE. So, it is very crucial for businesses to understand the concept. 

To put your mind at ease, we have gathered a list of information about this corporate tax in the UAE that might answer some of your common questions. Let’s dig into it:

What really is Corporate Tax in UAE?

In simple terms, a Corporate Tax is a tax that is levied on the net profit made by businesses. It is a form of direct tax that requires companies to pay a certain percentage of the profit of their businesses as tax. Besides that, it is also famous as “Business Profit Tax” or “Corporate Income Tax.”

What is the rate of Corporate Tax in the UAE and who should pay it?

The corporate tax rate is at 9% of the net profit that is made by the businesses. However, if the net profit is up to 3,75,000 AED, the corporate tax rate will be 0%. This has been applied to support small businesses and start-ups. And, all those businesses that fall under the category of making more than 3,75,000 AED net profit are liable to pay 9% tax. 

How is Corporate Tax calculated in UAE?

Corporate tax in UAE is calculated at 9% on the net profit as per the records of the company’s financial statements. However, we need to wait for the proper guidelines from authorities at the taxable net profit. 

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Which businesses or incomes are outside the scope of Corporate Tax in UAE?

All businesses that exceed the threshold of 3,75,000 AED have to pay the corporate tax. But, there are certain incomes and businesses that are exempted from the corporate tax. Look at the list of those incomes and businesses:

  • Not applicable on capital gains and dividends received by UAE businesses from its qualifying shareholdings
  • Not applicable to individuals. It includes any income from investments in shares, employment, real estate, other personal income that is not related to business. 
  • Not applicable on qualifying intragroup restructurings and transactions.
  • Not applicable to foreign investors who do not have any business in the UAE.

What’s to expect with the proposed Corporate Tax in UAE?

As we walk towards the d-day “June 2023,” there is a lot to unfold on federal corporate tax. Even though it is miles away from now, it is creating a lot of buzz around the globe. Since the federal corporate tax is going to be implemented on 1st June 2023, businesses have plenty of time to prepare for corporate tax. Additionally, the guidelines and regulations are yet to be published. However, it is expected to be available gradually. 

We all know that there is limited information on corporate tax that people can study and understand the complexity of it. However, one sure thing about this is that financial statements will become critical more than ever for businesses now. To arrive at the value of the corporate tax that a business is liable to pay, the net profit of the business has become the base. Undoubtedly, it is way more complicated than it sounds. 

The accuracy of the business data will define the correctness of financial statements. It ensures the right amount of corporate tax is determined. By now, you must have understood how helpful the business management software will be to your businesses. It assists your business to be corporate tax ready in no time. Besides that, it gives the ability to auto-generate the financial statements such as balance sheet, profit and loss a/c, and much more. 

Which software is best that support Corporate Tax in UAE?

Tally Prime is a business management software that is best for supporting corporate tax in UAE. To manage the growing needs of your business, it comes with a range of different features that helps the business. One of the powerful features of this software is to generate instant business reports related to financial, accounting, and inventory statements. This includes profit and loss account a/c, tax, balance sheet, and so on. Besides that, it helps you to be corporate tax ready. 

From filing accurate VAT returns to generating tax invoices, Tally Prime software comes with complete support for UAE VAT. Apart from being business-ready on the date of implementing the corporate tax, you should look after the process of a smooth transition to the corporate tax era. That is why the thing that should be at the top-most priority for your business is having the right business management software. Something that is not only is used for corporate tax but also helps you to understand and manage your business more efficiently than before.

Peniel Technology is the official Tally Prime reseller in UAE. It ensures that the software installed in your organization will be authentic. We have been presenting feature-rich, vigorous, and cost-effective solutions in the form of Tally Prime. With a strong and dedicated team of the best software professionals, we count ourselves as the ideal blend of technical excellence, customer service, and value for money. Besides that, it also comes with complete support for UAE VAT. With Tally Prime, all the information about your business will be just a click away. You will be able to achieve all the desired goals of your organization.