CORPORATE
TAX IN THE UAE
& THE GCC

CORPORATE TAX
IN DUBAI,
ABU DHABI &
THE UAE

Our Corporate Tax (CT) service in Dubai, Abu Dhabi and the UAE is part of our tax consultancy services in Dubai, Abu Dhabi and the UAE.

Corporate Tax is interchangeably referred to as Income Tax across the GCC countries. It is a form of direct tax collected by governments as a source of income; it is levied on the net income or profits of corporations and businesses.

The UAE government announced on 31 January 2022 their plan to introduce a federal Corporate Tax on business profits. With effect from 1 June 2023, Corporate Tax at a standard tax rate of 9% was applied to all mainland business and commercial activities on taxable profits above AED 375,000.

On 9 December 2022, the UAE released the Federal Decree-Law No. (47) of 2022 on the Taxation of Corporations and Businesses (hereinafter referred to as the ‘Corporate Tax Law’) which forms the basis for the implementation of the new Corporate Tax regime.

TIMING

Corporate Tax is effective for financial years starting on or after 1 June 2023. Businesses with an accounting reference date of 31 December will become subject to Corporate Tax from 1 January 2024.

TRANSFER PRICING

The UAE businesses will need to comply with transfer pricing rules and documentation requirements set with reference to the Organisation for Economic Cooperation and Development (OECD) Transfer Pricing Guidelines.

FOREIGN TAX CREDITS

Any foreign Corporate Tax and Withholding Taxes (WHT) imposed on the UAE taxable income is allowed as a tax credit against the Corporate Tax liability.

TAX BASE

CT will be payable on the profits of the UAE businesses as reported in their financial statements prepared in accordance with accounting standards accepted in the UAE, with minimal exceptions and adjustments.

LOSSES

Businesses will be able to offset a loss incurred in one period against the taxable income of upcoming periods up to a maximum of 75% from the future period’s taxable income. Tax losses may also be utilised against taxable income of another group company, subject to certain conditions being met.

RATE

Corporate tax rates in the UAE follow a structured system: entities with taxable income up to AED 375,000 are exempt from corporate tax, while those with income exceeding this threshold face a 9% tax rate. Multinational corporations, falling under OECD Base Erosion and Profit-Sharing laws within Pillar 2 of the BEPS 2.0 framework, are subject to a 15% corporate tax rate, specifically if their combined worldwide revenues surpass AED 3.15 billion.

FREE ZONES

Businesses established in free zones are subject to Corporate Tax, but the Corporate Tax regime still continues to honour the Corporate Tax incentives currently being offered to free zone businesses that comply with all regulatory requirements and that do not conduct business with mainland UAE. Free zone businesses are required to register and file a Corporate Tax return. A Free Zone entity need audited financial statements if it wants to benefit from the 0% Corporate Tax regime.

SCOPE & EXEMPTIONS

Corporate Tax applies to all persons (individual and corporate) carrying out business activities under a commercial business license in the UAE. Businesses engaged in the extraction of natural resources remain subject to the current Emirate level tax rules and will be outside the scope of Corporate Tax. Banking operations, including those currently taxed at the Emirate level, are also be subject to Corporate Tax. Dividends and capital gains earned by a UAE business from its qualifying shareholdings, as well as qualifying intra-group transactions and reorganisations subject to certain conditions being met, are exempt from Corporate Tax.

ADMINISTRATION

The Federal Tax Authority (“FTA”) shall be responsible for the administration, collection, and enforcement of Corporate Tax. Businesses are required to register for Corporate Tax purposes and are required to electronically file one Corporate Tax return per financial period. No provisional or advance Corporate Tax filings is required, nor any advance Corporate Tax payments. A UAE group of companies may elect to form a tax group and be treated as a single taxable person (fiscal unity) if the parent company holds at least 95% of the share capital and voting rights of its subsidiaries. A UAE tax group is only required to file a single tax return for the entire group.

UAE CORPORATE TAX REGISTRATION PROCESS

NAVIGATING UAE CORPORATE TAX AND ENSURING COMPLIANCE

To ensure compliance and mitigate risks, it is essential to seek professional guidance. Our team at Creation Business Consultants offers comprehensive support, including:

Registration Assistance: We streamline the registration process and facilitate obtaining the necessary tax numbers for your business.
Expert Consultation: Benefit from expert advice on tax planning, bookkeeping, financial statement preparation, and VAT and corporate tax filing.

Avoid the hefty penalty of AED 10,000 by registering for Corporate Tax promptly. Let’s collaborate to navigate the complexities of Corporate Tax, safeguarding your business’s financial health and reputation.

ACTIONS TO BE DONE BY BUSINESSES, SECURE YOUR FINANCIAL FUTURE

UAE businesses are strongly advised to prepare for the implementation of corporate tax. This may include the following:

Performing an initial high level impact assessment to understand the potential tax effect of these changes on their business.
Assessing whether the existing finance/tax function is sufficient.
Training for finance and tax teams.
Identifying potential restructuring opportunities.
Review of contracting arrangements.
Implementing changes to the existing legal structure.
Changes to accounting systems.

The above information should hopefully help businesses understand the requirements and potential implications of these far-reaching tax changes in the UAE. Further information changes are expected.

WHAT ARE THE RISKS RELATED TO CORPORATE TAX SERVICES IN THE UAE?

Through careful planning and professional advice, the minimal risks connected to Taxes in the UAE can be reduced. You can handle the Tax legislations and procedures easily with the assistance of professional consultants, ensuring adherence to legislations and reducing potential risks.
For an expert consultation, contact Creation Business Consultants via email [email protected] or call +971 4 878 6240 today.

The Corporate Tax legislation (Federal Decree-Law No. 47 of 2022) by the UAE Ministry of Finance was released on 9 December 2022. Please see the link below for an overview of the Corporate Tax Law:

LEARN MORE

UAE CORPORATE TAX FAQs

WHO IS SUBJECT TO UAE CORPORATE TAX?

UAE Corporate Tax applies to all juridical persons incorporated in the UAE and foreign entities effectively managed and controlled within the country. Natural persons that are engaged in business activities are also subject to this tax.

ARE THERE ANY EXEMPTIONS FROM UAE CORPORATE TAX?

Certain UAE entities, such as government bodies and specific investment funds, can be exempt from UAE Corporate Tax. However, most business and commercial activities fall under its purview and corporate tax will apply.

WHEN DOES THE UAE CORPORATE TAX REGIME APPLY?

The UAE Corporate Tax regime becomes effective for financial years starting on or after June 1, 2023.

Examples:

If your business’s financial year begins on July 1, 2023, and ends on June 30, 2024, you will be subject to UAE Corporate Tax from July 1, 2023. This marks the start of the first financial year following June 1, 2023.
For a business with a financial year starting on January 1, 2023, and ending on December 31, 2023, UAE Corporate Tax will apply from January 1, 2024. This aligns with the commencement of the first financial year following June 1, 2023.

HOW CAN CREATION BUSINESS CONSULTANTS ASSIST WITH UAE CORPORATE TAX?

Creation Business Consultants offers full support, including corporate tax registration, expert consultation on tax planning, bookkeeping, financial statement preparation, and VAT and corporate tax filing.

IS UAE CORPORATE TAX APPLICABLE NATIONWIDE?

Yes, UAE Corporate Tax is a federal tax applicable across all Emirates, ensuring uniformity in tax regulations throughout the entire country.

CAN NATURAL PERSONS BE SUBJECT TO UAE CORPORATE TAX?

Yes, natural persons engaged in business activities in the UAE, either directly or through partnerships or sole proprietorships, are subject to Corporate Tax.

CORPORATE TAX IN KUWAIT

WHO IS SUBJECT TO CORPORATE TAX IN KUWAIT?

GCC companies based in Kuwait wholly owned by citizens of the GCC are not subject to Corporate Tax. While companies with foreign ownership or mixed ownership are subject to Corporate Tax to the extent of the non-GCC share of interest.

WHAT ARE KUWAITI - SOURCES OF INCOME?

Profits from the following sources are subject to Corporate Tax:

1. Any profits and capital gains endured from conducting an industrial, services or commercial business or trade in Kuwait entirely or partially, or directly or through an agent.
2. Any activity or business carried out entirely or partially in Kuwait whether the contract has been signed inside or outside Kuwait.
3. Having a permanent establishment/presence in Kuwait where the sale and purchase contracts are signed or where the business activities are performed.
4. Commission earned in cash or in kind from agreements of representation or commercial mediation.
5. Gains received from the sale, lease or grant of franchise of an intellectual property (trademark, patent, copyright).
6. Granting loans in Kuwait.
7. Earning from property lease used in Kuwait.
8. Profits earned from purchase or sale of property, goods or related monetary or moral rights in Kuwait.
9. Profits resulting from providing management, technical, and consultancy services.
10. Income from a contract that has been performed inside and outside Kuwait should be reported entirely for tax in Kuwait for income determination purposes.
11. Trading activities in the Kuwait Stock Exchange (KSE); directly or through investment portfolios and funds.

TAX EXEMPTIONS IN KUWAIT

Profits from the sales of goods to a buyer in Kuwait if the supplier of the goods is entirely not involved in any operations inside the country.
Profits of a corporate body gained from dealing in or disposing of securities listed in KSE; whether these activities has been conducted directly or through investment portfolios and funds.

WHAT IS THE CORPORATE TAX RATE IN KUWAIT?

The Corporate Tax rate in Kuwait is set at 15%.

CORPORATE TAX IN QATAR

WHO IS SUBJECT TO CORPORATE TAX IN QATAR?

Any Person engaged in commercial activity in Qatar is subject to Corporate Tax. A commercial activity refers to any profession, vocation, service, trade, and contract in any industry.

There is no tax on personal income in Qatar. However, any individual who exercises any type of commercial activity in the country for income-related purposes is subject to Corporate Tax.

Further, the income of Qatari and GCC national resident investors in Qatar is exempted from taxation.

WHO IS A RESIDENT PERSON?

A resident is any natural person who owns permanent accommodation in the country or has stayed in Qatar for more than 183 days continuously or in intermittently during a 12-months period.

WHAT IS THE CORPORATE TAX RATE IN QATAR?

The Corporate Tax rate on businesses in Qatar is 10% of taxable income paid annually.

The taxable rate on oil operations is however not less than 35%.

WHAT ARE QATARI - SOURCES OF INCOME?

Profits generated from the following activities are subject to Corporate Tax:

Operating any commercial activity in the country.
Contracts executed fully or partially in the country.
Income generated from selling stocks, company shares, and individual companies that own real estate in the country.
Services provided by a main company, it branches and other related entities.
Income on loans provided from the country.

WHAT ARE THE TAX EXEMPTIONS IN QATAR?

Profits, gains and revenues on Public Treasury Bonds, Development Bonds and Public Corporation Bonds.
Income from companies engaged in agriculture and fisheries.
Income from companies engaged in craft activities that do not use machinery, and whose total annual income does not exceed QAR 200,000, and the number of employees does not exceed three within a taxable period, and which practice its activity through a single establishment.
Small size entities with three employees or less.
Income generated by non-Qatari companies for air navigation or marine operating in the country, on the condition of reciprocity.
Interest and bank returns due to a natural person, resident or non-resident, who do not practice a taxable activity.
Interest and returns on public debt and Islamic securities
- Profits earned from sale of real estate property or security realized by a natural person provided that the disposable property or security is not related to assets of a taxable activity.
Dividends and other income:
- If they are deducted from profits that have been taxed under the provision of the law.
- Distributed by a company whose profits are exempt from tax under the provision of the law.

CORPORATE TAX IN BAHRAIN

There is no Corporate Tax imposed on income or profits in Bahrain, except for local and foreign companies that operate in the oil and gas sector or are engaged in the exploration, production, or refinery of fossil fuels/hydrocarbons. The taxable income rate for such companies is 46%.

CORPORATE TAX IN OMAN

WHO IS SUBJECT TO CORPORATE TAX IN OMAN?

Businesses and corporations established in Oman.
Branches.
Foreign entities with operational activities in Oman.

WHAT IS THE CORPORATE TAX RATE IN OMAN?

There are no exemptions on Corporate Tax. The Corporate Tax rate is uniform for all types of entities at a rate of 15%. Yet, income generated from the sale of oil and gas originating from Oman is taxed at 55%.

However, the Corporate Tax rate is 3% if the taxpayer does satisfy all the following conditions:

An Omani corporate entity.
Registered capital of OMR 50,000 or less at the beginning of the tax year.
Employs 15 staff or less.
Annual revenues for any tax year are OMR 100,000 or less.
Is not involved in activities related to banking, insurance, financial services, public utility concessions, air and sea transport, extraction of natural resources, or other activities decided by the Council of Ministers.

CORPORATE TAX SERVICES IN SAUDI ARABIA