Category: Corporate Tax

To establish a qualifying public benefit entity UAE, organisations must meet specific government criteria to ensure they align with the nation’s social and economic development objectives. These entities play a crucial role in contributing to the public good, whether through education, healthcare, environmental sustainability, or other vital sectors.

Understanding the eligibility requirements for a qualifying public benefit entity in the UAE is essential for organisations looking to operate within this framework and benefit from the advantages offered to such entities regarding tax exemptions, regulatory support, and funding opportunities.

What are the Qualifying Public Benefit Entities in UAE?

A qualifying public benefit entity in the UAE (QPBE) is established and operated exclusively for activities that serve the public interest. These activities include:

• Cultural preservation
• Religious purposes
• Environmental conservation
• Scientific research
• Humanitarian aid
• Charitable initiatives
• Artistic endeavors
• Educational programs
• Healthcare services
• Athletic development
• Animal protection
• Other similar objectives aimed at enhancing public welfare

Such entities play a significant role in fostering community welfare while strictly operating without pursuing personal or financial gain.

Conditions for Public Benefit Entity Tax Exemption

Purpose-driven establishment

Operate exclusively for public benefit activities, such as charitable, educational, or scientific purposes.

Maintain professional operations as an association, chamber of commerce, or similar organisation fostering social development.

1. Non-commercial activities

• Operate exclusively for public benefit activities, such as charitable, educational, or scientific purposes.
• Maintain professional operations as an association, chamber of commerce, or similar organisation fostering social development.

2. Non-commercial activities

• Avoid conducting business activities unrelated to public benefit objectives, ensuring no diversion of resources.

Financial Integrity

1. Appropriate income and asset use

• Allocate all income and assets solely to public benefit objectives or essential operational expenses.
• Prevent any financial gain for founders, members, shareholders, or trustees.

2. Government recognition

• Secure exemption approval from relevant federal or local government authorities.
• Enjoy corporate tax exemption starting from the tax period when the Cabinet officially approves the application.

Compliance with Corporate Tax Law

Adherence to regulations

• Submit substantial proof to the Ministry of Finance to confirm compliance with Corporate Tax Law requirements.
• Await a Cabinet-issued memorandum confirming the entity’s status as a qualifying public benefit entity in the UAE.

Compliance and Record-Keeping Requirements

To maintain their tax-exempt status, QPBEs must adhere to the standards defined in Cabinet Decision No. 37 of 2023:

Registration with the Federal Tax Authority (FTA)

• Obtain a Tax Registration Number (TRN).
• File an annual declaration within nine months of the fiscal year’s end.

Detailed record-keeping

• Preserve all financial statements, agreements, and proof of activities for at least seven years.
• Ensure transparency in all operational dealings and the use of income or assets.

Periodic reporting

• Regularly submit documents, including financial statements and operational summaries, to demonstrate compliance with public benefit objectives.

Tax-Deductible Contributions

Contributions such as donations, grants, or gifts made to a qualifying public benefit entity UAE are deductible for corporate tax purposes, provided the entity is listed under Cabinet Decision No. 37 of 2023. However, contributions to entities not listed as QPBEs do not qualify for tax deductions.

Implications of Non-Compliance

Failing to comply with regulations can lead to severe legal and financial consequences, impacting businesses and individuals alike.

Temporary Non-Compliance

In cases of unintentional or temporary failure to meet eligibility criteria:

• The entity must notify the FTA within 20 business days.
• Rectify discrepancies within 20 business days, with possible extensions.

Permanent Non-Compliance

Entities engaging in deliberate non-compliance or attempting to misuse tax-exempt status will face immediate revocation of their exemption.

How to Apply for Tax-Exempt Status as a QPBE

Below are the points which will help you to apply for tax-exempt status as a qualifying public benefit entity in the UAE

1. Prepare documentation

Submit governing documents, financial statements, and proof of activities aligned with public benefit goals.

2. Apply to authorities

Present an application to the local or federal authority for verification and approval.

3. Cabinet decision

The Cabinet will approve post-verification, officially recognising the entity as a qualifying public benefit entity in the UAE.

Key Insights from Cabinet Decision No. 37 of 2023

Enacted on April 7, 2023, this decision defines the framework for identifying and monitoring QPBEs eligible for tax exemptions. It emphasises:

• Transparent operations aligned with public benefit objectives.
• Timely reporting of any operational changes impacting compliance.

Examples of Recognized Qualifying Public Benefit Entity in the UAE

A Qualifying Public Benefit Entity in the UAE is an organisation that meets specific criteria set by local authorities, particularly those in charge of tax and charity regulations. These entities are typically granted certain benefits or exemptions in recognition of their public benefit activities. Here are examples of such entities:

1. Charities and Nonprofits

Organisations that provide social services, such as aiding vulnerable populations or promoting health and education, often qualify as public benefit entities. Examples include:

• The Red Crescent Authority: A humanitarian organisation offering aid and disaster relief.
• Dubai Cares: A charity focused on improving education systems in developing countries.

Healthcare Institutions

Public hospitals or clinics that serve the community by providing free or subsidised healthcare may qualify. Examples include:

• Al Ain Hospital: A government-owned healthcare facility providing affordable care to UAE residents.
• Dubai Health Authority (DHA): Oversees the public health sector in Dubai, ensuring equitable access to medical services.

Educational Institutions

Schools, colleges, or universities that promote higher education and contribute to social development. Examples include:

• Khalifa University: A leading research university in the UAE that supports technological and scientific development for the public benefit.
• Zayed University: A public university that provides affordable education to UAE nationals.

Cultural and Heritage Organizations

Entities focused on preserving and promoting the UAE’s cultural heritage may also qualify, such as:

• The Louvre Abu Dhabi: A cultural institution offering access to art and heritage, promoting education and understanding of global culture.
• Sharjah Heritage Museum: A museum dedicated to preserving Emirati cultural traditions.

Environmental Organizations

Entities dedicated to environmental conservation, such as:

• Emirates Wildlife Society: Focuses on protecting the environment and wildlife in the UAE.

When certified as Qualifying Public Benefit Entities in the UAE, these organisations are often entitled to certain tax exemptions or incentives that help further their public service missions.

How Shuraa Tax will help!

Meeting the eligibility criteria for a qualifying public benefit entity in the UAE is critical for leveraging tax-exempt status. Compliance with operational, financial, and reporting requirements ensures these entities continue their impactful work for the community.

For professional guidance on QPBE registration and compliance, contact us at +971508912062 or email us at info@shuraatax.com.

The Corporate tax registration deadline has been announced in the UAE by the FTA, and businesses need to take note of this deadline. The deadline for corporate tax registration in the UAE depends on the license issuance date, so businesses must ensure they meet this deadline to avoid any penalties or issues with the tax authorities.

It’s always better to be prepared and take care of these responsibilities in a timely manner to maintain smooth operations and avoid any unnecessary complications.

UAE Corporate Tax Structure

The UAE introduced a federal corporate tax (CT) effective for financial years starting on or after 1 June 2023. The tax is applied to the taxable income of businesses operating in the UAE.

Generally, all businesses and commercial activities in the UAE are subject to corporate tax, with some exceptions. Taxable persons include:

• Companies incorporated or established in the UAE.

• Foreign companies with a fixed place of business in the UAE.

• Certain non-resident juridical persons without a permanent establishment.

• Resident natural persons conducting business activities, if their annual income exceeds AED 1 million.

Tax Rates and Exemptions

Tax Rates:

• 0% for taxable income up to AED 375,000.

• 9% for taxable income above AED 375,000.

Exemptions:

• UAE government entities.

• UAE government-controlled entities.

• Extractive businesses.

• Non-extractive natural resource businesses.

• Qualifying public benefit entities.

• Qualifying investment funds.

• Public and private pension funds.

• Juridical persons wholly owned by exempt persons.

• Other persons as determined by the Cabinet.

Deadline for Corporate Tax Registration in UAE for Taxable Persons

The following table provides a general overview of corporate tax registration timeline in the UAE:

Type of Taxable Person	License Issuance Date	Deadline for Registration	Additional Notes
Resident Juridical Person	Before 1 March 2024	Staggered deadlines based on license issuance date (See table below or FTA guidelines)	May require interim tax returns
Resident Juridical Person	On or after 1 March 2024	Within 3 months of incorporation, establishment, or recognition	Applies to free zones and mainland companies
Non-Resident Juridical Person with Permanent Establishment	Before 1 March 2024	Within 9 months of establishment	PE income subject to UAE corporate tax
Non-Resident Juridical Person with Nexus	On or after 1 March 2024	Within 3 months of establishing nexus	Nexus based on specific criteria (e.g., income threshold)
Resident Natural Person	Turnover exceeds AED 1 million in a calendar year	By 31 March of the following year	Individuals engaged in business activities

Specific deadlines may vary based on individual circumstances. It is essential to consult with a tax professional or refer to the FTA website for the most accurate information.

Deadlines for Resident Juridical Persons in 2024

The UAE Federal Tax Authority (FTA) introduced Decision No. 3 of 2024, which outlines specific deadlines for corporate tax registration in UAE. These deadlines are based on the date of license issuance.

License Issuance Date	Registration Deadline
January – February	31 May 2024
March – April	30 June 2024
May	31 July 2024
June	31 August 2024
July	30 September 2024
August – September	31 October 2024
October – November	30 November 2024
December	31 December 2024

Implications of Late Tax Registration in the UAE

Here’s what happens if a business misses the corporate tax registration deadline in the UAE:

1. Penalties

The FTA imposes financial penalties for late registration, which can be AED 500 per day of delay, up to a maximum of AED 100,000. These penalties can vary depending on the duration of the delay.

2. Interest Charges

In addition to penalties, businesses might face interest charges on unpaid taxes.

3. Legal Consequences

Persistent non-compliance could lead to more severe legal actions.

4. Reputational Damage

Failure to comply with tax regulations can damage a business’s reputation and credibility.

Steps to Register for Corporate Tax in the UAE

Registering for corporate tax in the UAE is primarily done through the EmaraTax portal. Here’s a general outline of the process:

Step 1. Create an EmaraTax Account

Visit the EmaraTax portal (https://tax.gov.ae/en/services/corporate.tax.registration.aspx)

Register with your email ID and phone number or UAE Pass.

Step 2. Add Taxable Person

Once logged in, you’ll see a screen listing Taxable Persons linked to your profile. If there are no Taxable Persons, create a new one by providing necessary details like legal name, trade name, license number, and legal structure.

Step 3. Initiate Corporate Tax Registration

Select ‘Register’ under the Corporate Tax section on the dashboard. Follow the on-screen guidelines and instructions.

Step 4. Provide Entity Details

Complete the online application form, providing detailed information about your business, including:

• Entity details (legal structure, name, trade license)

• Identification details (trade license copy, passport copies of owners)

• Business activities

• Owners or shareholders information

• Contact details

• Authorized signatory details

Step 5. Review and Submit

Carefully review all entered information for accuracy. Declare the accuracy and completeness of the information provided. Submit the Corporate Tax Registration application.

Step 6. Obtain Tax Registration Number (TRN)

Upon successful registration, you will receive a TRN, which is essential for tax compliance.

We highly recommend consulting UAE tax experts at Shuraa Tax for the most accurate and up-to-date information, as tax regulations may change.

Secure Your Business’s Tax Future with Shuraa

Meeting the corporate tax registration deadline in the UAE is crucial to avoid hefty penalties and ensure smooth business operations. Timely registration also helps you manage your finances better and sets your business up for long-term success.

If the process seems overwhelming, you don’t have to handle it alone. At Shuraa Tax, we’re here to help. Our team of experienced accountants, auditors, and tax advisors in Dubai is ready to take care of all your tax and accounting needs. We’ll guide you through the registration process, assess your current financial situation, and help you plan your taxes and bookkeeping effectively.

Let us take the stress out of corporate tax registration so you can focus on growing your business. Reach out to Shuraa Tax today at +971508912062 or info@shuraatax.com, and we’ll make sure everything is done accurately and on time.

Frequently Asked Questions (FAQs)

What is the deadline for corporate tax registration in the UAE?

Deadlines for Corporate Tax Registration: If your total turnover exceeds 1 million for the year 2025 then you must comply with Corporate Tax Registration by 31 March 2026.

Corporate Tax Filing: After the tax registration you must file your Corporate Tax Return by 30 September 2026.

Tax liability is a crucial aspect of running a successful business, and understanding how to calculate it can save your company significant amounts of money. In the UAE, businesses are subject to corporate tax, which is implemented to ensure that companies contribute their fair share towards the country’s economy.

As a business owner in the UAE, it is essential for you to understand how to calculate tax liability, have a solid grasp of tax calculations to minimize your tax liability and maximize your profits.

By following our step-by-step approach, you’ll be able to determine your taxable income, identify potential exemptions, and ultimately calculate the exact amount owed to the authorities.

What is the Tax Liability of a Company?

Tax liability refers to the legal obligation of a business to pay taxes to the government. This tax is typically calculated based on the company’s taxable income, which is its gross income minus allowable deductions and expenses.

How it works:

1. Businesses keep track of their income and expenses throughout the year.

2. They calculate their taxable income by subtracting allowable expenses from their total income.

3. They apply the relevant tax rate to their taxable income to determine their tax liability.

4. Businesses then need to file tax returns and make tax payments to the government by the deadlines set.

Tax Liability of a Company in UAE

The UAE introduced a federal corporate tax system in June 2023. Here’s a simplified explanation:

• The standard corporate tax rate in the UAE is 9%.

• Businesses with annual taxable profits not exceeding AED 375,000 (around $100,000) are subject to a 0% tax rate.

• This tax applies to most businesses operating in the UAE mainland, excluding those in Free Zones with a qualifying corporate tax exemption.

• Businesses operating in certain free zones may have different tax regulations.

Taxable Income for UAE Corporate Tax

Taxable income in the UAE corporate tax system refers to the profit amount a business uses to calculate its tax liability. It’s essentially the net profit remaining after deducting allowable expenses from the gross income.

Gross Income

This includes all the revenue a business generates from its operations, such as sales, service fees, and interest earned.

Applicable Expenditures

These are the ordinary and necessary expenses a business incurs to generate its income. Examples include:

• Cost of goods sold (COGS)

• Salaries and wages

• Rent and utilities

• Marketing and advertising expenses

• Interest on business loans

Important Note: Not all expenditures are automatically considered “applicable.” The UAE Ministry of Finance has specific guidelines on what qualifies as an allowable deduction.

Allowable Deductions

These are specific expenses explicitly permitted by the tax law to be subtracted from the gross income. These typically go beyond general business expenses and might include:

• Depreciation on assets

• Bad debts

• Charitable contributions (with limitations)

Exempt Income (if applicable)

Certain types of income might be exempt from corporate tax under specific UAE regulations.

Tax Rates and Brackets:

The UAE corporate tax system has a single rate structure, not brackets. This means a flat rate of 9% is applied to the entire taxable income exceeding the threshold of AED 375,000. Businesses with taxable income below this threshold are subject to a 0% tax rate.

Businesses operating in certain Free Zones (QFZs) may have different tax rules. Qualifying Free Zone Persons (QFZPs) might benefit from a 0% tax rate on their qualifying income, subject to specific criteria set by the UAE Corporate Tax law.

The UAE tax regulations are still evolving. Businesses should stay updated on the latest information. Therefore, consult our tax professional at Shuraa Tax for specific guidance on calculating their taxable income.

How to Calculate Tax Liability? Example Calculation

“XYZ Company” operates in the UAE mainland with the following financials for the year:

Gross Revenue: AED 1,500,000

Cost of Goods Sold (COGS): AED 600,000

Operating Expenses (Salaries, Rent, etc.): AED 450,000

Step 1: Calculate Gross Profit

Gross Profit = Gross Revenue – COGS

Gross Profit = AED 1,500,000 – AED 600,000

Gross Profit = AED 900,000

Step 2: Subtract Allowable Operating Expenses (Assuming all expenses are allowable)

Taxable Income = Gross Profit – Operating Expenses

Taxable Income = AED 900,000 – AED 450,000

Taxable Income = AED 450,000

Step 3: Apply Tax Rate

Exceeds Threshold: The taxable income (AED 450,000) surpasses the threshold (AED 375,000). We need to calculate the tax liability on the amount exceeding the threshold.

Taxable income exceeding threshold: AED 450,000 – AED 375,000 = AED 75,000

Corporate Tax Liability: AED 75,000 (taxable income exceeding threshold) * 9% (tax rate) = AED 6,750

Therefore, based on this scenario, XYZ Company would have a corporate tax liability of AED 6,750 due to exceeding the tax threshold.

Small Business Relief for UAE Corporate Tax

Small Business Relief in UAE allows eligible businesses to be treated as if they haven’t generated any taxable income for specific tax periods. In simpler terms, it offers tax exemption within certain limits.

Who Qualifies for Small Business Relief (SBR)?

To claim SBR, your business must meet the following criteria:

• Be a resident person for UAE corporate tax purposes.

• Have a revenue of AED 3 million or less for the relevant tax period and all previous tax periods. This applies to tax periods ending before or on December 31, 2026.

• Not be a Qualifying Free Zone Person (operating in a Free Zone without a corporate tax exemption) or a member of a Multinational Enterprise Group (MNE Group).

If your business qualifies, you can elect for SBR by filing a notification with the Federal Tax Authority (FTA) within the tax return for the respective tax period.

How to Reduce Tax Liability for Your Business in UAE?

Here are some strategies you can consider to potentially reduce tax liability for your business in the UAE:

1. The UAE’s corporate tax system is relatively new. It’s essential to stay informed about the latest regulations and updates issued by the Federal Tax Authority.

2. Operating in a Free Zone with a valid corporate tax exemption can significantly reduce your tax liability.

3. Proper bookkeeping practices ensure you have accurate records of income and expenses to support your tax filings and maximize allowable deductions.

4. Understand which expenses are considered tax-deductible under UAE regulations. These typically include costs of goods sold, salaries, rent, utilities, and depreciation.

5. Analyze your operating expenses and identify areas for potential cost reduction without compromising business operations. 

6. If your business meets the criteria (revenue under AED 3 million and other conditions), claim SBR to enjoy tax exemption on your profits.

And most importantly, a qualified tax professional like Shuraa Tax can provide personalized guidance on tax planning strategies to minimize your tax liability while ensuring compliance.

Simplify Your Tax Compliance with Shuraa Tax

Figuring out your tax liability of a company is important for keeping your business running smoothly and out of trouble with the law. If you make mistakes, it can cost you a lot of money in fines and you might miss out on tax savings. It’s essential to keep up with the latest tax rules and understand how they affect your business to avoid errors and get the most out of any tax liability. 

At Shuraa Tax, we understand that dealing with taxes can be complicated. Our team of skilled accountants, auditors, and tax advisors in Dubai is here to help. We can look at your tax situation, make your bookkeeping easier, and take care of the filing process for you. By working with Shuraa Tax, you can lower your tax bill and have more time to focus on growing your business. 

Contact Shuraa Tax today at +971508912062 or drop us an email at info@shuraatax.com.

The introduction of corporate tax in the UAE is scheduled for June 1, 2023. According to the law, individuals and businesses subject to taxation will face a 9% corporate tax from their initial fiscal year starting on or after June 1, 2023. They must acquire a corporate tax registration number.

Since the initial announcement, businesses and tax experts have extensively deliberated on this development. This move positions the UAE as the fourth GCC nation to implement a federal business tax.

Incorporating a corporate tax registration number aligns with the UAE’s commitment to enhancing its status as a premier global hub for commerce and investment, furthering its strategic growth and transformation goals. Additionally, corporate tax deters unfavourable tax practices and ensures compliance with international standards for tax transparency.

Corporate Tax Registration UAE

As per FTA’s Federal Decree Law 47, every taxable entity, including Free Zone Persons, must register for Corporate Tax and obtain a Registration Number. 

• The Federal Tax Authority explicitly requires exempt persons to register for Corporate Tax. 
• Taxable persons must submit corporate tax returns within nine months of the end of the specified tax period. 
• This deadline covers settling all Corporate Taxes owed for the respective Tax Period covered by the filed return. 
• In cases of exclusion permitted by the Minister, a Taxable Person must adhere to a specific timeline and format to register for Corporate Tax with the Federal Tax Authority. 
• The Authority mandates that Taxable Persons or Independent Partnerships register for Corporate Tax and acquire the Tax Registration Number. 
• Corporate Tax registration with the Tax Authority should be promptly completed when an individual becomes a Taxable Person. 
• Upon successful registration, entities are subject to a standard Corporate Tax rate of 9% on taxable income exceeding AED 375,000, with a 0% charge on taxable income up to AED 375,000. 

How to register corporate tax in UAE?

• The Federal Tax Authority has introduced a pre-registration process for corporate tax on the EmaraTax platform.
• EmaraTax is an online portal consolidating tax-related tasks, including registrations, returns, refunds, deregistrations, and payments.
• The platform’s user-friendly interface facilitates easy VAT payments and corporate tax management. 
• To get started, individuals can create an account on EmaraTax or migrate their existing FTA Account to the platform.
• Successful registration for corporate tax requires the submission of all necessary documents as outlined in the UAE corporate tax regulations.
• Utilising the EmaraTax Login guide simplifies the process of creating an account or transitioning an FTA Account, ensuring a smooth registration experience for corporate tax in the UAE. 

Eligibility for Corporate Tax Registration in UAE and Applicable Rates

Businesses in the UAE are required to register for corporate tax, which is imposed on taxable income at the following rates:

• A corporate tax rate of 0% is applicable to taxable income up to AED 375,000, and this rate applies to all qualifying income generated by the person in the free zone.
• A 9% corporate tax rate is imposed on taxable income surpassing AED 375,000, and it applies to all non-qualifying income generated by the individual in the free zone.
• Multinational corporations falling under OECD Base Erosion and Profit-Sharing laws within Pillar 2 of the BEPS 2.0 framework, with combined worldwide revenues exceeding AED 3.15 billion, the Ministry of Finance announced that the UAE will not implement Pillar Two rules before 2025.

Essential Documentation for UAE Corporate Tax Registration

For Corporate Tax registration in the UAE, businesses must provide specific documents. The entire process is online, and the required documents include:

• Copy of the valid Trade License.
• Passport copies of the owners/partners/shareholders associated with the license (valid and unexpired).
• Emirates ID copies of the owners/partners/shareholders holding the license (valid and unexpired).
• Memorandum of Association (MOA) or Article of Association (AOA).
• Contact details of the person concerned, including mobile number and email address.
• Comprehensive company contact details, encompassing the complete address and P.O. Box.
• Information specifying the Corporate Tax Period.

Exempt and Taxable Persons for UAE Corporate Tax

Given their significance and contribution to the social fabric and economy of the UAE, several types of companies or organisations are exempt from corporate tax. So, these are referred to as Exempt Persons and consist of:

Automatically Exempted	Government entities Government-controlled entities specified by the cabinet decisions
Exempted if notified to the Ministry of Finance (subject to certain conditions)	Extractive Business Non-Extractive Natural Resource Business
Exempt if listed in a cabinet decision	Qualifying Public Benefit Entities (PBE)
Exempt if applied to and approved by the Federal Tax Authority (subject to certain conditions)	Public or private pension and social security funds. Qualifying Investment Funds Wholly owned & controlled UAE subsidiaries of a government entity

Government entities, government-controlled entities, and extractive and non-extractive natural resource businesses may be exempt from corporate tax filing, compliance, and registration requirements unless involved in taxable activities per the Corporate Tax Law.

Exclusions from Corporate Tax: What Falls Outside the Corporate Tax Scope?

• Individual Income Exemption:

Corporate tax does not apply to individual income unassociated with a trade or business in the UAE. This includes income from employment such as salary, real estate, interest income, share investments, and other personal income sources. 

• Foreign Investors: 

Foreign investors not engaged in business activities within the UAE are exempt from corporate tax obligations.

• Free Zone Businesses:

Businesses operating within free zones, provided they adhere to all regulatory criteria, will maintain corporate tax advantages.

• Capital Gains and Dividends:

Corporate tax does not apply to capital gains or dividends earned by UAE corporations or individuals from qualifying shareholdings.

• Intragroup Transactions:

Intragroup transactions meeting the criteria for tax grouping are not subject to corporate tax.

Understanding the Corporate Tax registration in UAE: Rates and Qualifications

• Corporate Tax Rate Overview: 

   Enterprises in the UAE must pay a fixed percentage of their net profit as corporation tax if the taxable profit (net) surpasses AED 375,000. 

• Corporate Tax Rates for UAE Businesses and Taxable Persons: 

   – 0% for taxable income up to AED 375,000. 

   – 9% for taxable income exceeding AED 375,000. 

• Corporate Tax Rates for Entities in Qualifying Free Zones: 

   – 0% on qualifying income. 

   – 9% on income other than qualifying income. 

• Qualifying Free Zone Person’s Net Profit: 

  The profit earned by a Qualifying Free Zone Person from international or UAE Free zone business is labelled as “Qualifying Income.”

The Importance of Corporate Tax Assessment Before Registration

Before registering for corporate tax, it’s vital to assess the risks thoroughly and legal factors related to the business, pre- and post-implementation.This approach ensures compliance with the country’s tax regime. Failure to properly assess may lead to corporate tax fines and penalties. 

The assessment before corporate tax registration encompasses three key components: impact assessment, document assessment, and tax compliance assessment. Consider engaging professional corporate tax consultants or specialized firms for high-quality corporate tax assessment services.

Empower Your Business with Shuraa Tax

Shuraa Tax offers top-notch corporate tax services, accounting solutions, and audit services to help your business navigate everyday challenges, such as navigating corporate tax laws and transfer pricing regulations, addressing compliance issues, managing resource constraints, and enhancing accounting system compliance. For detailed information on UAE Corporate Tax Registration, contact Shuraa Tax Consultants & Accountants. Contact us via phone or text at +971 508912062 or email info@shuraatax.com.

The United Arab Emirates (UAE) has long been a haven for entrepreneurs and businesses seeking a favorable tax environment. As a result, the UAE Ministry of Finance introduced Ministerial Decision No. 73 of 2023 on April 3rd, setting the conditions for small businesses to claim Small Business Relief UAE corporate tax under the new Corporate Tax Law.

This ministerial decision aims to further promote UAE as the appealing destination for business growth and investment.

Let’s understand more about the new regime for corporate tax Law. Also, discuss how it going to affect the small businesses in UAE.

What is UAE Corporate Tax?

UAE Corporate Tax will be calculated on the taxable adjusted net profit of a business, which is the net profit after deducting all allowable expenses. Allowable expenses include the cost of goods sold, operating expenses, and net interest expense up to 30% of EBTDA.

The Federal Tax Authority (FTA) will require businesses to file an annual corporate tax return. Therefore, the return will need to include the business’s taxable profits and any other information required by the FTA.

A Taxable Person must also settle the Corporate Tax Payable within (9) nine months from the end of the relevant Tax Period, or by such other date as determined by the Authority.

Corporate Tax Rates Under the Corporate Tax Law

In December 2022, UAE introduced its new corporate tax regime through Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses.

This law, set to take effect from June 1, 2023, brings with it a headline tax rate of 9% for accounting periods beginning on or after this date. While this marks a shift toward taxation, it remains a competitive rate on the global stage.

The UAE Corporate Tax rate will be 9% on taxable income above AED 375,000. There will be a 0% tax rate on taxable income up to AED 375,000.

To calculate UAE Corporate Tax, businesses will need to start by determining their taxable income. Subsequently, the total income is reduced by subtracting all allowable deductions. These deductions encompass various items such as the cost of goods sold, operating expenses, and depreciation.

Here is an example of how UAE Corporate Tax would work:

A company has total income of AED 1 million for the year. The company’s allowable deductions are AED 500,000. Therefore, the company’s taxable income is AED 500,000.

The company’s corporate tax liability is calculated as follows:

The first 375,000 will be taxed at 0% and the rest of the amount will be taxed at 9 %.

1. 375,000 * 0% = 0

2. 500,000 – 375,000 = 125,000 *.09 = 11,250

The company will need to pay its corporate tax liability of AED 11,250.

Eligibility and Thresholds for Corporate Tax Rates

Ministerial Decision No. 73 of 2023 clarifies the eligibility criteria for Small Business Relief. Businesses with an annual revenue below AED 3 million (approximately USD 817,000) will qualify for this exemption.

Importantly, this threshold applies to each tax period, including both the relevant tax period and previous tax periods. Once a business’s revenue exceeds this threshold, the Small Business Relief will no longer be available.

It’s worth noting that businesses availing of this relief can still carry forward incurred tax losses. They can also disallow net interest expenditure from these tax periods for use in future tax periods, provided they elect not to apply for Small Business Relief for the UAE corporate tax.

However, it’s essential to note that the Small Business Relief exemption does not apply to Qualifying Free Zone companies or members of Multinational Enterprises (MNEs) with consolidated group revenues exceeding AED 3.15 billion. These entities will follow a different tax regime.

What is the Purpose of the Small Business Relief UAE Corporate Tax?

To support small businesses and nurture entrepreneurship, the Corporate Tax Law provides for a Small Business Relief exemption. This provision allows small businesses that qualify as Resident Persons to be treated as having no taxable income for a specific tax period.

The intent behind this relief is clear – to ease the tax burden on small enterprises, encourage their growth, and stimulate economic activity.

Opportunities for Entrepreneurs to Establish a Business in the UAE

With the introduction of Small Business Relief and a competitive corporate tax rate, the UAE continues to be an attractive destination for entrepreneurs and businesses. Moreover, here are some opportunities and advantages for those looking to establish a business in the UAE:

1. Tax Incentives: Small businesses can take advantage of the Small Business Relief to reduce their tax burden, allowing for more flexible financial planning and growth strategies.
2. Stability and Infrastructure: The UAE offers a stable political environment, world-class infrastructure, and a strategic location connecting East and West, making it an ideal hub for international business operations.
3. Global Connectivity: The UAE’s advanced transportation and communication networks provide easy access to global markets, facilitating international trade and expansion. Furthermore, this strategic infrastructure positions businesses for seamless connectivity and growth on the global stage.
4. Diverse Economy: The UAE’s diverse economy spans various sectors, from finance and technology to tourism and logistics, offering a wide range of business opportunities. Additionally, this economic diversity provides entrepreneurs with an abundance of options for investment and growth.
5. Pro-Business Environment: The government’s commitment to promoting a pro-business environment is evident in its continuous efforts to streamline regulations and improve ease of doing business.

Streamline Your Taxation with Shuraa

The UAE’s introduction of Small Business Relief for the corporate tax marks a pivotal moment for entrepreneurs and small enterprises seeking opportunities in establishing business in the UAE. Furthermore, this initiative opens new avenues for growth and competitiveness in the local market.

However, the UAE taxation process might be a little overwhelming for entrepreneurs. That’s where Shuraa comes in!

To seize the advantages presented by Small Business Relief UAE corporate tax, businesses can benefit from the expertise of professionals like Shuraa Tax & Accounting Services.

As a team of knowledgeable and qualified accountants, auditors, and tax advisors in Dubai, UAE, Shuraa offers comprehensive taxation services, including UAE VAT, tax management, and accounting. Moreover, we stand ready to assist businesses in simplifying their taxation and financial management needs.