Corporate Tax Service In The United Arab Emirates

Corporate tax is a tax on profits calculated and paid by companies and individuals registered and conducting business in the UAE. The tax does not apply to income in the form of interest and other personal incomes from bank deposits and savings programs, as well as personal incomes from real estate investments.

The tax is calculated as the product of the tax rate on the net profit for the financial year. The rate of 0% applies to profits up to 375,000 AED, and the rate of 9% applies to amounts exceeding this threshold. Example: If a company earned a profit of 400,000 AED at the end of the financial year, it will be required to pay a corporate tax amounting to 2,250 AED. 375,000 * 0% + (400,000 – 375,000) * 9% = 0 + 25,000 * 9% = 2,250.

The UAE aims to transform its market into one of the world’s largest business centres. Introducing the profit tax is one of the steps taken to achieve this goal. It is intended to strengthen the country’s position as an attractive jurisdiction for investment and entrepreneurship.

Corporate tax is calculated and paid on net profit, while VAT is calculated on revenue. Companies collect VAT paid to them by customers and then transfer it to the budget. There is no threshold for registration for corporate tax, while for VAT, it exists and is equal to 175,000 AED for voluntary registration and 375,000 AED for mandatory registration.

If a company is registered in a free economic zone, the tax rate for it will be 0% regardless of the profit amount. However, the obligation to submit a declaration to the tax authority remains.

Individuals engaged in business or entrepreneurial activities will be subject to corporate tax and registration requirements only if their total turnover exceeds 1 million AED in the UAE calendar year.

The Corporate Tax Law applies to companies with branches in other countries. However, such firms have the right to apply for exemption from tax on profits received by branches outside the UAE. Organizations engaged in certain types of activities are exempt from paying corporate tax. The exemption applies to government companies, government institutions, and public institutions in the UAE. Corporate tax is also not paid by: companies engaged in the extraction of natural resources; charitable organizations; organizations engaged in activities with social security funds and several other organizations subject to certain conditions.

Yes, violations of the law are subject to sanctions in the form of fines and/or imprisonment. Violations such as non-payment of taxes on time, providing false tax returns, violating the deadline for submitting a declaration, failure to provide documents upon request, inability to maintain accounting records, and other types of violations are punishable. If the violation is deliberate or repeated, the amount of fines may increase and may exceed the amount of arrears by a multiple.