What is Corporate Tax (CT)?
Corporate tax is a direct tax levied on the net income or profit of corporations and other entities from their business operations.
Objectives of Corporate Tax:
By introducing corporate tax, the UAE aims to:
- Cement its position as a leading global hub for business and investment
- Accelerate its development and transformation to achieve strategic objectives
- Reaffirm its commitment to meeting international standards for tax transparency and preventing harmful tax practices.
Scope of Corporate Tax:
Corporate tax will apply to:
- All businesses and individuals conducting business activities under a commercial license in the UAE
- Free zone businesses (The UAE CT regime will continue to honor the CT incentives currently being offered to free zone businesses that comply with all regulatory requirements and that do not conduct business set up in the UAE’s mainland)
- Foreign entities and individuals only if they conduct trade or business in the UAE in an ongoing or regular manner
- Banking operations
- Businesses engaged in real estate management, construction, development, agency, and brokerage activities.
Exemptions from Corporate Tax:
The rules regarding exemptions from corporate tax are as follows:
- Businesses engaged in the extraction of natural resources are exempt from CT as these businesses will remain subject to the current Emirate level corporate taxation.
- Dividends and capital gains earned by a UAE business from its qualifying shareholdings will be exempt from CT.
- Qualifying intra-group transactions and reorganizations will not be subject to CT, provided the necessary conditions are met.
Additionally, corporate tax will not apply to:
- Individuals earning salary and other employment income, whether received from the public or private sector
- Interest and other income earned by an individual from bank deposits or savings schemes
- A foreign investor’s income earned from dividends, capital gains, interest, royalties, and other investment returns
- Investment in real estate by individuals in their personal capacity
- Dividends, capital gains, and other income earned by individuals from owning shares or securities in their personal capacity.
The Federal Tax Authority (FTA) will be responsible for the administration, collection, and enforcement of corporate tax.
To learn more about Corporate tax-related matters, consult us and take advantage of compliance services from our professional team of chartered accountants.