Mandatory to File Corporate Tax returns in UAE

The UAE Government has recently introduced a federal Corporate tax regime that will be effective for finances starting on or after 1 June 2023. The UAE CT will be applicable across all the Emirates and is relevant to all business and commercial activities. There is an exception on the natural resources which will be taxed to Emirate level taxation.

The UAE CT will be applicable at the following rates 

Taxable income                                                          UAE CT RATE

AED0-AED 375000                                                            0%

Above AED 375000             9%

Impact of UAE CT on Freezone Businesses in UAE

The freezone businesses lie within the scope of UAE CT and are required to register and file a CT return that they will continue to benefit from CT holidays and 0% taxation. In this case, the businesses have to comply with all regulatory requirements and not conduct business with mainland UAE.

There will be different tax rates for the large multinationals that should meet the criteria under Pillar Two of the OECD Base Erosion and Profit Shifting project where the companies must have consolidated global revenues of more than EUR 750m.

The corporate tax will be payable on the net profit recorded in the company's financial statements with minimal exceptions and adjustments. The tax losses incurred from the CT effective date can only be carried forward to offset the taxable income in future financial periods.

Corporate Tax in UAE will not apply on 

• The income generated from the employment.
• The income generated from real estate.
• Income earned from savings and investment returns.
• The other income is retained by individuals in their capacity and is not related to the UAE trade or business.
• Dividends, capital gains, and returns on investments earned by foreign investors.

Exemptions from UAE CT 

• The capital gains and dividends are earned from the qualifying shareholders.
• The intra-group transactions and restructuring incomes.
• Domestic and cross-border payments of interest, dividends, and royalties will not be attracting a withholding tax in the UAE.
• Foreign tax credits will be available on the tax incurred by income earned outside the UAE by UAE businesses.

How to file UAE Corporate Tax in UAE?

The businesses can file it electronically once for each financial period without submitting an advance CT payment based on provisional tax returns. The UAE group of companies can form a tax group to file a single return for the entire group and transfer the tax losses to other members of the group. The UAE CT regime will have transfer pricing rules and documentation requirements as per the OECD TP Guidelines.

Need help with filing Corporate Tax?

The introduction of the UAE CT regime enables the UAE to adopt and implement the measures that help in overcoming the challenges arising from the digitalization of the global economy. The introduction of the global minimum tax rate for large multinationals.

FlyingColour has taxation and accounting professionals onboard with huge experience. We provide financial statements, tax services, and consulting for organizations across the UAE.

To learn more about When to File a Corporate Tax Return in the UAE?, book a free consultation with one of the Flyingcolour team advisors.

Disclaimer: The information provided in this blog is based on our understanding of current tax laws and regulations. It is intended for general informational purposes only and does not constitute professional tax advice, consultation, or representation. The author and publisher are not responsible for any errors or omissions, or for any actions taken based on the information contained in this blog.