As of June 1st, 2023, the Taxation of Corporations and Businesses, Federal Decree-Law No. 47 of 2022, will come into effect. Due to this, companies that are registered in the UAE will be required to pay a federal corporate tax. This tax directly affects medium- and large-sized businesses, and will result in 9% of company profits to be paid to stay in compliance with the law. The federal tax will be instituted throughout the whole of the emirates.
Note! For a business to be classified as medium-sized, it must reach yearly profits of at least AED 3,000,000 (USD 817,000). Small businesses, those making less than the minimum yearly profits to be considered medium, are currently exempt from the new corporate tax.
Until the beginning of summer of 2023, the Emirates had a progressive corporate tax scale paid by organizations who worked specifically with extracting gas and oil, and could be as high as 55%. Insurance companies and foreign banks were also subject to a fixed tax rate of 20%.
Residents and non-residents who carry out entrepreneurial activities or run a licensed business in the UAE must pay the federal corporate tax if the total turnover from the enterprise meets or exceeds AED 1,000,000 (USD 272,000) per Gregorian calendar year.
Residents and non-residents who do not conduct business in the UAE are not required to register or pay corporate tax. Funds exempt from taxation include:
- income earned from investments in banking, brokerage accounts, etc.;
- income earned through renting or selling property.
All individual entrepreneurs and licensed businesses that conduct their business in the UAE must register with the Federal Tax Authority (FTA) and receive a corporate tax registration number. They must also keep financial records and file a yearly FTA corporate tax report, even if there was zero business activity in that taxation period.
The new federal corporate tax law was adopted on December 9th, 2022, extending the key provisions spelled out in the public consultation document and published by the Ministry of Finance on April 28th, 2022.
*The law is still in the process of being finalized. Stay tuned for news and updates.