How to calculate corporate tax rate in UAE

HOW TO CALCULATE COPORATE TAX RATE IN UAE

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The UAE Ministry of Finance (MoF) stated on January 31, 2022, that the Federal Corporate Tax in UAE (CT) on company profits/income will be implemented for fiscal years beginning on or after June 1, 2023.

The UAE Corporate Tax regime was created to combine best practices throughout the world while also reducing the cost of compliance for firms.

Corporate tax will be imposed on the net earnings of UAE businesses as recorded in their financial reports, which will be prepared in compliance with global accounting rules, subject to any changes necessary by Corporate Tax Regulations.

The UAE has publicly declared the new system’s major design principles and policies, even though the CorporaLEteARTNaxMOLaRwE has not yet been approved.

CORPORATE TAX APLICABLE

Effective Date : June 1, 2023.

DATE

The UAE Corporate Tax regime will be implemented for fiscal years commencing on or after June 1, 2023.

A business having a financial year that begins on July 1, 2023, and ends on June 30, 2024, will be subject to Corporate Tax (CT )beginning July 1, 2023

A company with a financial year that begins on January 1, 2023 and ends on December 31, 2023 will be subject to the UAE Corporate Tax (CT ) beginning on January 1, 2024.

HOW DO YOU DETERMINE THE BUSINESS PROFIT SUBJECT TO UAE CORPORATE TAX?

Except for commercial activities such as the extraction of natural resources, which will be taxed in accordance with emirate-specific levies. All business and commercial activities in the UAE will be subject to the UAE corporation tax. The company tax will be paid on taxable income, which is defined by the UAE corporate tax legislation as a business’s accounting net profit after specific adjustments (deductibles).The corporation tax will be levied on ‘taxable income,’ defined as a business’s accounting net profit after certain adjustments (deductibles), as defined by the UAE corporate tax law. Accounting net profit is the amount stated in financial statements produced according to International Accounting Standards

The UAE corporate tax policy applies to commercial operations, which include all forms of commercial activity conducted in the UAE under a trade license or authorization, as well as income obtained under freelancer licenses (where taxable income exceedsAED 375,000).

THE TAX RATE

The UAE Corporate Tax will be applied on taxable income, which is defined by the UAE Corporate Tax law as a company’s accounting net profits after specific adjustments. Accounting net profit refers to the amount stated in financial statements produced according to International Accounting Standards. The following will be the progressive tax rate: 0% for taxable income up to AED 375,000; 9% for taxable income beyond AED 375,000; and A separate tax rate for significant multinationals that fulfil specified conditions laid forth in the OECD’s Base Erosion and Profit Shifting project’s ‘Pillar Two.’ Foreign Corporate Tax levied on taxable revenue in the UAE will be credited against the UAE Corporate Tax obligation. Entities subject to the UAE Corporate Tax will be entitled to carry forward excess losses and use losses earned before the Corporate Tax took effect.

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