- taxation
- 2023-01-07
- Waseem
Everything About Corporate Tax In UAE
Corporate tax in UAE is a hot topic right now. You might be wondering what it is and how it affects your business. In this blog, we'll explore it all down for you.
Types of Taxes in UAE
There are various types of taxes that are levied in the UAE. The most common type of tax is corporate tax, which is levied on companies that are registered in the UAE. The rate of corporate tax varies from emirate to emirate, but it is typically around 35%.
Other common types of taxes include income tax, value-added tax (VAT), and real estate tax. Income tax is levied on individuals who earn a salary or have other income in the UAE. VAT is a consumption tax that is levied on the sale of goods and services. Real estate tax is levied on the owner of real estate property.
Overview of the Corporate Tax
When it comes to corporate taxation in the UAE, there are a few things that companies and business owners need to be aware. There is a general corporate tax rate of 30% in the UAE, which applies to companies and businesses that are registered and operating in the country. However, there are a number of exemptions and reliefs that may apply in certain cases. For example, companies that are engaged in certain designated activities such as oil and gas exploration may be exempt from corporate tax.
In addition, there is a 5% Zakat or Islamic tax payable on profits by companies registered in the UAE. This Zakat is deductible from the overall corporate tax liability.
Finally, there is a 10% value added tax or VAT which was recently introduced in the UAE. This applies to most goods and services, and is also deductible from the corporate tax liability.
Who Should Pay the Corporate Tax?
The UAE has a corporate tax system that applies to companies registered in the country. The amount of tax you pay will depend on your taxable income, and tax rates range from 2.5% to 55%.
There are a few things to note about corporate tax in the UAE:-
?Only companies registered in the UAE are liable to pay tax. If you're a foreign company operating in the UAE, you won't need to pay corporate tax as long as you don't have a physical presence in the country.
?Taxable income includes profits generated from local and foreign sources. This means that even if your company is based outside of the UAE, it will still need to pay corporate tax on profits generated from activities in the country.
?Company ownership is not a factor in determining tax liability. This means that whether your company is 100% foreign-owned or majority-owned by locals, it will still be subject to corporate tax.
What are the Corporate Tax Rates in the UAE?
The good news is that there’s no corporate tax in the UAE. That means that any profits generated in the country are exempt from income tax, with no liabilities whatsoever.
So, if you start a business in the UAE, you can look forward to enjoying a 0% rate of corporate tax – no matter how big or small your business is. Furthermore, you may also be able to access other incentives, such as reduced taxation rates in certain Free Zones.
However, it is worth noting that certain entities are subject to Withholding Tax on payments made to the company or person outside of the UAE. This applies to entities like banks and government bodies, but generally does not apply to private companies.
But overall, owing to its tax-friendly environment and lack of personal taxes – such as VAT or capital gains tax – setting up a business in the UAE could be a very wise decision for businesses that are looking for an attractive and low-risk environment for their investments.
Benefits of Hiring an Accounting Firm in UAE for Corporate Tax Filing
When it comes to corporate tax in UAE, there are numerous benefits for having an experienced accounting firm handle it for you. For one, they can provide insight on the complexities of corporate tax in the country. For another, they can help you maximize the deductions that are available to lessen the amount of taxes you have to pay.
Another great benefit is that an experienced accounting firm can help navigate any additional issues or requirements that might crop up during the filing process. With their expertise, they can provide advice and guidance to streamline the process and ensure that everything is done correctly and submitted on time before any potential penalties kick in.
An accounting firm in UAE like Risiansaccounting can also provide peace of mind in knowing that your business is compliant with all of UAE's corporate tax regulations. This means no worrying about getting fined or contacted by tax authorities because all your filings will be done right first time around.
FAQs:-
Q1.What is CT rule?
Ans1. Companies are subject to a direct tax known as CT on any profits they make. In some countries, CT is also called Corporate Income Tax or Business Profits Tax.
Q2.Why is UAE introducing CT?
Ans2. The United Arab Emirates (UAE) aspires to become a prominent global hub for business and investment, and a competitive CT regime based on international best practises is expected to help the country reach this goal more quickly.By instituting a CT regime, the UAE is reiterating its dedication to international tax transparency and the elimination of detrimental tax practises.
Q3. Is the UAE the first country in world to introduce CT?
Ans3. The vast majority of nations, including the vast majority of Middle Eastern nations, have established a complete CT regime.
Q4. When will UAE CT regime become effective in nature?
Ans4. For fiscal years beginning on or after 1 June 2023, the UAE CT regime will go into force.
Examples:-
??From the period of 1 July 2023, UAE Corporate Tax will apply to all businesses with a fiscal year commencing on or after 1 July 2023 and ending on and before 30 June 2024 which is the beginning of the 1st financial year that starts on or after 1 June 2023.
??Starting in January 2024, any company with a fiscal year that begins on 1 January 2023 and ends on 31 December 2023 will be required to collect UAE CT (which is the beginning of the first financial year that starts on or after 1 June 2023).
Q5. Who will subject to UAE CT?
Ans5. Only those who do business in the UAE, either as sole proprietors or partners in unincorporated businesses, will be required to pay CT. When the time is right, the UAE Cabinet will release a decision providing more detail on the circumstances under which a natural person would be subject to UAE CT.
Q6. Will UAE entities owned by UAE or GCC nationals be subject to the UAE CT rule?
Ans6. The CT in the UAE does not care what country you were born in or where you currently live. All legal entities that are either incorporated in the UAE, have an Emirati citizen or resident on staff, or have a fixed base of operations in the UAE are subject to UAE CT. This is true regardless of the nationality or place of residence of the entity's original creators or ultimate owners.
Q7. Will UAE CT be applicable to all the businesses in each Emirate?
Ans7. Yes, it is applicable for all emirates businesses.
Q8. Will I have to pay UAE CT along with Emirate level taxes?
Ans8. Under some circumstances, UAE CT will not apply to businesses involved in the exploitation of the UAE's natural resources and to businesses engaged in certain non-extractive activities that are subject to Emirate level taxation. Companies operating in the UAE may be liable to taxation at both the Central Government (CT) and Emirate levels. The amount of CT owed cannot be reduced by the amount of emirate taxes already paid.
Q9. Will UAE CT replace the VAT system in the UAE?
Ans9. No, both are different and are applicable across UAE.
Q10. Will I have to pay UAE CT with VAT in the UAE?
Ans10. As a business, you must split your CT and VAT payments if you are VAT registered. Your company may still be liable for CT even if it is not VAT registered.
Conclusion:- Everything you need to know about corporate tax in UAE. As you can see, it's not as straightforward as some people may think, and it's important to take professional advice if you're not sure about anything. At the same time, it's important to stay on top of your accounting and make sure you're compliant with all the relevant regulations. A good accounting firm in dubai like Risians Accounting can help you with this, and make sure you're taking advantage of all the tax benefits available to you.
You should Also Read:- How To Compute Your Tax Liability Under UAE Corporate Tax?
Corporate Tax on Free Zone and Mainland Firms
