What is Corporate Tax in UAE?

Tally Solutions | Updated on: January 16, 2023

What is corporate tax in UAE

In January 2022, the UAE Ministry of Finance announced that it would introduce federal Corporate tax (CT) on the net profits of businesses. Corporate tax is a direct tax levied on the net income or profit of corporations and other entities from their business.

UAE Corporate tax will apply to all UAE businesses, except for the extraction of natural resources, which will remain subject to Emirate-level corporate taxation. Foreign businesses and individuals will be subject to Corporate Tax only if they run a trade or business in the UAE in an ongoing or regular manner.

UAE Corporate Tax will apply equally to all categories of profits and other (net) income reported in the financial statements prepared in accordance with internationally accepted accounting standards.

How is Corporate Tax in UAE Calculated?

Reports and Accounts Books for UAE Corporate Tax – What’s Next?

Why Corporate tax?

Applying Corporate tax in UAE is considered to be a competitive advantage to attract foreign investments to UAE. Paying corporate taxes can be more beneficial for business owners than paying additional individual income tax. Corporate tax is one of the international best practices that will cement the 'UAE's position as a leading global hub for business and investment., This accelerates UAE's development and transformation to achieve its strategic objectives, reaffirming its commitment to tax transparency and preventing harmful tax practices.

Corporate tax rate in GCC countries

Corporate tax rates range from 10% in Qatar to 15% in Kuwait and Oman, all the way to 20% in Saudi Arabia. The UAE announced that it will introduce a 9% corporate tax on business profits from June 1, 2023. Bahrain is about to introduce it in 2023 too.

In Kuwait, Saudi, and Qatar, corporate tax is levied on the profit share attributable to the non-GCC shareholder of the local entity. For example, in Saudi, corporate tax applies only to the income earned by non-Saudi owners.

Importance of Books of Accounts in corporate tax

All GCC countries, including UAE, live in the digital transformation era, where books of accounts are digitized using accounting or business management software. With the introduction of VAT a few years ago and the proposed corporate tax, managing books of accounts is no longer an option and automating it using business management software is a must.

Considering how a corporate is calculated, the books and financial statements will become even more critical for businesses. This is because the net profit on these statements becomes the base to arrive at the corporate tax that a company is liable to pay.

The accuracy of the business data will define the correctness of financial statements, ensuring the right amount of corporate tax is determined. It’s the right time for businesses to invest in reliable business management software and be corporate tax-ready before it is implemented.

How can TallyPrime help?

TallyPrime is a business management software that can manage the growing needs of your business.

For a smooth transition to the corporate tax era, having such powerful integrated software should be the top priority of your business in the UAE.

What's more? Along with enabling your business to be corporate tax ready, it includes full support for UAE VAT, from generating tax invoices to filing accurate VAT returns and many other features such as:

  • Generate business reports for accounting, inventory, and financial statements such as profit and loss accounts, balance sheets, etc.
  • Easy and quick to configure the tax details via VAT Rate Set-up
  • Manage your books of accounts with ease in high accuracy and consistency.
  • Create VAT-compliant invoices, while managing different types of VAT supplies such as exports, imports, etc.
  • Completing VAT returns in simple few steps
  • Ease of managing your daily financial transactions

Book your free demo, and we are sure you'll be delighted with this experience.

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Read more about Corporate Tax UAE

Corporate Tax in UAE, When will Corporate Tax in UAE be implemented, 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, FAQs on Corporate Tax in UAE

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