How is Corporate Tax in UAE Calculated?

Tally Solutions | Updated on: April 20, 2023

Rate of corporate tax in UAE

According to the UAE Ministry of Finance announcement in January 2022, Corporate Tax in UAE will apply at a standard rate of 9% with the following tax segmentations and rates:

• 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

How is corporate tax calculated in UAE?

Corporate tax UAE is calculated at 9% of the net profit shown in the company's financial statements after deducting all applicable deductions and excluding the exempted income. Any foreign taxes paid will also be allowed for reduction from the profit shown in the financial statement.

The net profit derived after all deductions will be considered as taxable income. The 9 % corporate tax will be levied only if the taxable value exceeds AED 375,000.

Let’s look at the corporate tax calculation

Example of corporate tax calculation in UAE

Abdul LLP, a trader based in Abu Dhabi, UAE, declared their annual financial statements for 2021. The net profit declared by Abdul LLP is AED 500,000. They are also eligible for deductions of 25,000. The type of deductions allowed for corporate tax deduction is yet to be made available by the authorities.

As shown in the table, first the net profit from the financial statement is reduced by deductions as allowed by the corporate rules. Later, the exempt amount of 375,000 is reduced to arrive at the taxable income. Thus, the corporate tax Abdul LLP will be paying is 9000 AED ( 100,000 @ 9%).

How will business management software help in corporate tax?

All-in-one business management software is more essential than ever, especially for businesses operating or trading with the UAE. This is because the net profit declared in the financial statements becomes the base for calculating the corporate tax in UAE. Business software is second to none when it comes to generating financial and business reports.

In order to pay the right corporate tax, the financial statements should be accurate. For this to happen, a lot depends upon the correctness of business data. Any error in business data or financial statement may result in you paying high taxes, which is a loss for business or leads to a shortfall, which attracts fines and penalties. Here is why business management is important. The automated reports ensure that the financial statements and other reports are accurate and enable you to remit the right amount of tax. The best part is you can save time, effort and money and, at the same time, be compliant.

How can TallyPrime help?

The financial statements will now evolve as more essential for businesses in UAE. The accuracy of the business data will define the correctness of financial statements. This is what makes TallyPrime a perfect match for your business.

TallyPrime comes with a complete solution for all your business needs. You can plan for your business growth and gain more opportunities while TallyPrime, a business management software, helps you manage all the business complexities.

Here are some features of TallyPrime

• With a wide range of financial and business reports, you can be corporate tax ready from today.
• Complete support for UAE VAT, from generating tax invoices to filing accurate VAT returns
• Auto-generate all financial statements with a click of a button
• Multiple business modules to manage your growing business needs
• Keep a complete track of your inventories
• Online access to business reports on mobile or any device

Want to try TallyPrime? Book a free demo now

Know more about Corporate Tax

• Corporate Tax-Free Zones UAE
• 5 Things to Know About UAE Corporate Tax
• Corporate Tax Limit and Applicability in UAE

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