In the UAE, many firms have never had to pay income tax on their earnings. This is set to alter, with the Ministry of Finance (MOF) announcing on 31 January 2022 that CIT will be imposed in the UAE. The CIT law is set to apply for fiscal years commencing on or after June 1, 2023.
The UAE’s new accountancy rules are part of its effort to comply with global tax regulations to ease the burden on corporations and protect small enterprises and startups. The UAE, which is one of the world’s major business centers, will maintain one of the lowest rates of corporate tax in UAE, but it will diversify government revenue away from hydrocarbons.
The following are the major characteristics of the CIT system, as announced by the MOF (subject to possible modifications once the regime is implemented fully):
The CIT rules will be in place for revenue levels beginning on or after June 1, 2023.
The proposed CIT scheme would apply to all commercial (i.e., commercial, industrial, and professional) activities in the UAE, with the exception of natural resource extraction, which is presently subject to tax at an Emirate level.
Individuals who do not hold a business license or permit to carry out commercial, industrial, or professional activities in the UAE will be covered by the CIT framework. This includes income earned by freelance professionals for work performed under a freelancer’s credentials.
The MOF has stated that the proposed federal CIT system will also apply to UAE banking operations (although foreign bank branches are already subject to a CIT regime at an Emirate level).
In the midst of these developments, it was also announced that corporate tax incentives offered to free zone businesses will continue to be honored up to the point that the free zone business meets all necessary regulatory standards and does not conduct operations in mainland UAE. Many companies presently operating in both mainland UAE and free zones under a dual licensing system may be affected.
Businesses in a tax-free zone are nevertheless required to fulfill certain CIT requirements, such as the need to register and submit a CIT return.
Three different tax rates are laid out in the plan:
The MOF has stated that the following sorts of earnings will be exempt from CIT tax:
The foreign CIT paid on UAE taxable income will be eligible to offset part of the UAE payable CIT. Note that, while the UAE has negotiated over 130 double tax treaties, this is a subject that will just continue to make the tax system work appropriately in terms of cross-border trade and ownership ties both before and after the introduction of UAE CIT.
Businesses will be able to use losses incurred under the CIR regime (as of the CIT regime’s entry into force) to reduce taxable income for future financial periods.
A company incorporated in the United Arab Emirates (UAE) will be able to decide to form a tax group and be treated as a single entity for tax purposes, subject to certain limitations set forth in the UAE CIT legislation. A UAE tax group will be able to submit a single tax return for the entire group.
Businesses in the UAE must also comply with transfer pricing standards and documentation requirements based on the OECD transfer pricing rules.
The actual CIT legislation has not yet been published, and it is still being developed. Although the regulation that will take effect may differ from MOF’s statement, businesses operating in the UAE should think about the potential effects of the declared policy and plan for its implementation.
Do not hesitate to reach out to us at Bestax Chartered Accountants to get more information on the UAE corporate tax.
However, I was the head of the finance department yet still found it difficult to conduct a financial audit in accordance with UAE regulations. Although, due to the competence and experience of BextaxCA's qualified auditors, all my concerns have been resolved
ylie Johnson
Accounts Manager, Abu Dhabi, General Trading Company
I utilized BestaxCA's accounting and bookkeeping services for my retail business in Abu Dhabi. It was fascinating to observe how they handled the finances. They provided me with out-of-the-box accounting solutions, which were really useful
Abdul Kaleem
Finance Manager, Dubai, Manufacturing Company
As per FTA requirements, the Bestax Chartered Accountants in UAE assisted me with VAT registration and filing. I personally consult with their tax experts to ensure they have the expertise necessary to provide timely answers
Abdul Kaleem
Finance Manager, Dubai, Manufacturing Company
I was so happy with the BextaxCA's services that I decided to use them for my personal tax planning and return filing. They really know their stuff when it comes to taxes!
Dwayne Perkins
Accounts Manager, Dubai, Services Provider
Drop your contact details and requirements and we will arrange a free consultation call for you.
Bestax Chartered Accountants is a leading financial consultancy and business advisory firm in the heart of Dubai, Business Bay. We strive to deliver a hundred percent on every tax advisory, auditing, accounting & bookkeeping, and other financial services. BestaxCA assists national and international clients by enhancing their efficiency, compliance, growth, and profitability.
We provide a free 30 days trial, No upfront payment! If you are not satisfied with our services, you don’t pay anything
We provide a free 30 days trial, No upfront payment! If you are not satisfied with our services, you don’t pay anything