New corporate tax in the UAE: will it apply to your business…

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(MENAFN – Khaleej Times)

Posted: Mon, Jan 31 2022, 5:30 PM

Last updated: Mon, Jan 31 2022, 10:19 PM

The UAE Ministry of Finance on Monday announced the introduction of a federal corporate income tax for organizations that begin their first fiscal year from June 1, 2023.

Here are some of the important takeaways from the announcement from the federal tax authorities:

Who will the new tax apply to?

Corporate tax will apply to all businesses and commercial activities, with the exception of natural resource extraction which will remain subject to corporate tax at the Emirates level.

Are there any exemptions?

A 0% tax rate will be applicable on taxable profits up to MAD 375,000, with the aim of supporting small businesses and startups.

Will the tax apply to personal income?

According to WAM.

And foreign investors?

Given the UAE’s position as a global financial center and international business hub, the UAE will not impose withholding taxes on domestic and cross-border payments.

Foreign investors who do not carry on business in the UAE will not be subject to corporate tax.

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Will the new law impact current free zone incentives?

The UAE corporate tax system will continue to honor the tax incentives currently offered to Free Zone companies that comply with all regulatory requirements and do not do business with the mainland UAE.

What will the tax rate be?

Corporation tax was set at a standard statutory rate of 9 percent.

What are the other instructions?

Companies will only have to file one corporation tax return per fiscal year and will not be required to make advance tax payments or prepare interim tax returns. Transfer pricing and documentation requirements will apply to UAE companies with reference to the OECD Transfer Pricing Guidelines.

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