UAE To Introduce Corporate Tax Rate From 2023


UAE To Introduce Corporate Tax Rate From 2023

On 31 January 2022 the Ministry of Finance of the UAE announced their introduction of a Federal Corporate Tax regime on business profits. The regime will we in full force starting 1 June 2023.


Corporate Tax Rates are indicated in the below table:

SR.NO.

Taxable Income/ Category

Corporate Tax Rate (%)

1

Taxable income up to AED 375,000

0%

2

Taxable income over and above AED 375,000

9%

3.

Large multinationals (having consolidated global revenue exceeding EURO 750 million – equivalent to AED 3.15 billion) that meet specific criteria set with reference to “Pillar Two” of the OECD Base Erosion and Profit Shifting Project

 

Different tax rate



Applicability to free zones and financial free zones

  • Free Zone (including financial free zones) businesses in UAE will be subject to Corporate Tax. However, it has been clarified that the Corporate Tax regime will continue to honor the corporate tax incentives currently being offered to free zone businesses that comply with all regulatory requirements and that do not conduct business in mainland UAE.
  • Businesses established in a free zone will be required to register and file a Corporate Tax Return.


Applicability to foreign persons

  • Foreign entities and foreign individuals will be subject to Corporate Tax only if they conduct a trade or business in the UAE in an ongoing or regular manner.
  • Moreover, Corporate Tax will generally not be levied on a foreign investor's income derived from dividends, capital gains, interest, royalties and other investment returns.


Applicability of Transfer Pricing Rules:


Transfer Pricing rules and documentation requirements will now be aligned with the OECD Transfer Pricing Guidelines i.e., Master File and Local File. Documentation will require groups of companies to perform benchmarking searches to justify their pricing policies of inter-company transactions. We await for further details/clarifications on potential exemptions for qualified intra-group transactions and other compliance requirements that may be introduced.



How Crowe Can Help:

Although the press release and FAQ provided relevant information regarding some of the most relevant changes brought forward by the introduction of a UAE Corporate Tax, its technical aspects and specifics will only be known once official legislation is passed. Nevertheless, the current announcement by the UAE Ministry of Finance will change the tax landscape of the UAE Significantly and international groups with businesses in the UAE are advised to evaluate the impact of such development. At Crowe UAE, our team of experts can help you in assessing the challenges and opportunities that the introduction of a Corporate Tax will bring.

them.