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The Ministry of Finance of UAE manages and develops the financial resources of the UAE’s federal government. They accomplish this mission through fiscal policies and local and international relations so that the development, integrity, and sustainability of the fiscal system are in agreement with the best practices available. The ministry has introduced a new corporate tax so that the UAE will become a leading global hub in terms of business and investment. This will increase the UAE’s development and transformation and its strategic objectives will be accomplished.
A corporate tax is a tax on the income or capital of a corporation and other entities. The taxes are levied on a business's taxable income. Just like a person pays income tax, a corporation pays corporate tax. Many countries have such taxes on a national level as well as a state level.
Corporate taxes are calculated based on the company's net income or taxable income. The net income is also called net profit or net earnings. You need to calculate all the income generated from all the revenue streams. The expenses, which include operating expenses, depreciation, amortization, interest on loans, and others, incurred by the company, also need to be calculated. Business management software such as TallyPrime makes it easy with ready availability of financial reports such as balance sheet, profit and loss account etc.
A federal corporate tax is a tax levied by a federal government on businesses which are operating in its jurisdiction. The federal tax rate varies from one country to another.
Currently, there is no federal corporate tax in the United Arab Emirates (UAE). The corporate tax is calculated on a territorial basis. It is based on the tax decrees issued by each individual Emirate's government. There are seven Emirates in the UAE. The corporate tax rates range is wide. It is 10 percent in Qatar, 15 percent in Oman and Kuwait, and 20 percent in Saudi Arabia.
On 31 January 2022, the Ministry of Finance (MoF) made the announcement that a new federal corporate tax (CT) system will be implemented and it will be put into effect either on 1 July 2023 or 1 January 2024. It will depend on the financial year followed by the business. Businesses will be required to register once the registration process and ongoing business compliance obligations are announced by the Ministry of Finance.
The corporate tax in UAE will be 9 percent with some exceptions. Businesses that have a net income or a taxable income of AED 375,000 or more will be affected by this new tax. Of course, this means that small businesses whose taxable income does not exceed AED 375,000 will have the tax rate remain at 0%.
The new corporate tax law suggests employing the accounting net profit position in the financial statements of businesses as the starting point for specifying the taxable income.
The business' financial reports, financial statements, and accounting books will be the most important for such assessment.
The UAE introduced a federal tax that is applicable to all businesses and commercial activities operating in the seven emirates. However, there are some exceptions like:
The objectives of the new corporate tax UAE are:
According to the Ministry of Finance, the new corporate tax rates are:
The Federal Tax Authority (FTA) will be in charge of the administration, collection, and enforcement of the new corporate tax.
Foreign companies and individuals will be subjected to the new corporate tax in UAE as long as they run a business or conduct trade in the UAE in an ongoing or regular manner.
A foreign investor’s income gained from dividends, interest, royalties, capital gains, and other investment returns will not come under the new corporate tax.
TallyPrime allows your business to be corporate tax ready along with making sure the business transition goes smoothly.
The features of TallyPrime will make sure your business is corporate tax ready and VAT compliant. The many features of TallyPrime include:
For a smooth transition to the new corporate tax era in the UAE, using efficient integrated software should be the top priority for businesses. TallyPrime is extremely user-friendly and it has step-by-step instructions to help at every step Your business will have better control over the the cash flow and your business efficiency will increase. Following tax rules will become easier since your books are accurate and balanced. You will get your hands on all the business reports effortlessly.
At Tally Solutions, you will find the answers to your questions regarding the new corporate tax in the UAE. New rules can be confusing, especially tax ones, but you don’t have to worry when you have Tally Solutions.
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Read more about Corporate Tax UAE
Corporate Tax in UAE, When will Corporate Tax in UAE be implemented, What is Corporate Tax in UAE, Corporate Tax Law, How is Corporate Tax in UAE Calculated, Corporate Tax Exemption, Corporate Tax Limit and Applicability in UAE, Reports and Accounts Books for UAE Corporate Tax
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