ABU DHABI &
Our Corporate Tax 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 currently has no system of federal income taxation. Instead, most of the Emirates have their own corporate income tax decrees enacted in the late 1960s. However, in practice, corporate income tax is only applied to upstream oil and gas companies and branches of foreign banks.
The UAE announced on 31 January 2022 that it will introduce a federal corporate tax on business profits. With effect from 1 June 2023, corporate tax at a standard tax rate of 9% will be applied to all mainland business and commercial activities on taxable profits above AED 375,000.
Corporate Tax will be 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.
FOREIGN TAX CREDITS
Any foreign Corporate Tax imposed on UAE taxable income shall be allowed as a tax credit against the Corporate Tax liability.
Corporate Tax will be payable on the profits of UAE businesses as reported in their financial statements prepared in accordance with internationally acceptable accounting standards, with minimal exceptions and adjustments.
The Corporate Tax rates are 0% for taxable income up to AED 375,000; 9% for taxable income above AED375,000; and “a different tax rate” (not specified but a rate but 15% would be in line with the global minimum effective tax rate) for large multinationals that meet specific criteria set with reference to “Pillar Two” of the Organisation for Economic Co-operation and Development base erosion and profit shifting (“OECD BEPS”) project (referring to multinational corporations with consolidated global revenues in excess of €750m (c. AED 3.15 billion)).
Businesses established in free zones (including financial free zones) will be subject to Corporate Tax, but the Corporate Tax regime will continue 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. There is no indication whether the free zones will amend or update their incentive regimes. Free zone businesses will be required to register and file a Corporate Tax return.
The Federal Tax Authority (“FTA”) shall be responsible for the administration, collection, and enforcement of Corporate Tax. Businesses will be required to register for Corporate Tax purposes and will be required to electronically file one Corporate Tax return per financial period. No provisional or advance Corporate Tax filings will be 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 will only be required to file a single tax return for the entire group.
The UAE Ministry of Finance plans to issue the Corporate Tax law in H2 of 2022. Please see link below to an overview of the expected Corporate Tax Law following the issue of the public consultation document by the Ministry of Finance:
For more information, you can watch Creation Business Consultants’ UAE Corporate Tax webinar:
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.
Profits from the following sources are subject to Corporate Tax:
- 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.
- Any activity or business carried out entirely or partially in Kuwait whether the contract has been signed inside or outside Kuwait.
- Having a permanent establishment/presence in Kuwait where the sale and purchase contracts are signed or where the business activities are performed.
- Commission earned in cash or in kind from agreements of representation or commercial mediation.
- Gains received from the sale, lease or grant of franchise of an intellectual property (trademark, patent, copyright).
- Granting loans in Kuwait.
- Earning from property lease used in Kuwait.
- Profits earned from purchase or sale of property, goods or related monetary or moral rights in Kuwait.
- Profits resulting from providing management, technical, and consultancy services.
- Income from a contract that has been performed inside and outside Kuwait should be reported entirely for tax in Kuwait for income determination purposes.
- Trading activities in the Pakistan Stock Exchange (KSE); directly or through investment portfolios and funds.
- 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.
The corporate tax rate in Kuwait is set at 15 percent.
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.
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.
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%.
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.
- 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 percent.
CORPORATE TAX IN OMAN
- Businesses and corporations established in Oman
- Foreign entities with operational activities 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