Corporate Tax Limit and Applicability in UAE

Tally Solutions | Updated on: April 20, 2023

• Corporate tax applicability limit
• Business to whom the corporate tax will be applicable in UAE
• Important business reports for corporate tax calculation
• How can TallyPrime help?

The UAE Ministry of Finance announced the lowest corporate tax rate within the GCC region at a standard rate of 9%. The announcement on 31 January 2022 is considered a huge step to attract foreign investments to UAE.

Corporate tax applicability limit

The UAE Ministry of Finance states that corporate tax rates will be levied only if the income exceeds the defined threshold limit. In all those cases where the net income is below the threshold, it will be exempted from corporate tax. Below is corporate tax applicability limit:

• 0% for taxable income up to AED 375,000
• 9% for taxable income above AED 375,000
• A different tax rate (not yet specified) for large multinationals that meet specific criteria

A multinational enterprise is a business that operates in its home country and in other countries, through a foreign subsidiary, branch, or another form of presence/registration. Simply making income outside its home country without a foreign presence or registration would not make a business a multinational corporation.

Type of business to whom the corporate tax will be applicable in UAE

According to the UAE Ministry of Finance announcement, the Federal Tax Authority (FTA) will be responsible for the administration, collection, and enforcement of the corporate tax from:

• All businesses and individuals performing business activities under a commercial license in UAE
• Free zone businesses in UAE
• Foreign businesses and individuals only if they run a trade or business in UAE in an ongoing or regular manner. This is subjective and depends on factors such as management and control, availability of permanent establishment, income source etc. 
• Banking operations
• Businesses engaged in real estate management, construction, development, agency, and brokerage activities

Important business reports for corporate tax calculation

The UAE Corporate Tax income regime proposes using the accounting net profit (or loss) position in financial statements as the starting point for determining taxable income. As result, the financial reports generated by the companies in UAE will form the ground for such assessment.

Among the different financial statements, the profit and loss account statement will be key because it's a statement that is prepared to determine the net profit earned by the business for a given period. Corporate tax is levied on the net income, and the net profit/loss from the profit and loss account will become the base for tax calculation.

The corporate tax calculation process will include finding the net adjusted income after considering the allowed deductions and then evaluating the taxable business income

Smart business management will play a key role in maintaining all financial reports, records, and statements.

How can TallyPrime help?

Whatever your business model or industry, we are here to help you meet all tax requirements without hassle while having powerful features to support your business growth.

TallyPrime is a business management software that has integrated features and functions to manage your business more efficiently than before. TallyPrime features can help you to be corporate tax ready and VAT compliant, it also comes with more smart features like:

• Generate instant automatic financial reports of all types you may need for tax requirements, financial audits, and for business decisions
• Generate a profit and loss account with ease via a single click of a button
• Generate comparative profit and loss statements accounts for months, quarters, years, etc.
• Creating financial reports and statements with 100% accuracy
• Adapt your business needs, you can configure and personalize your business reports to match your country and its regulations

Know more about Corporate Tax

• Corporate Tax-Free Zones UAE
• 5 Things to Know About UAE Corporate Tax
• Allowable Deductions Under UAE Corporate Tax Law

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