UAE Tax Landscape: 9% CIT

The United Arab Emirates is no longer a zero-tax jurisdiction.

We were informing about this major shift in our article, back in June 2023: https://ibccs.tax/announcement/uae-corporate-tax/

Certain exemptions apply, however many of the businesses will now pay a corporation tax.

On-shore entities, as well as Free Zone entities involved in transactions with on-shore entities, will be subject to a 9% corporation tax.

 

Corporate Tax Registration Timelines

Consequently, the Federal Tax Authority (FTA) has announced timelines for the new UAE Corporate Tax registration. All the companies (irrespective if freezone or mainland) shall register for the corporate tax.

The timelines for submitting a Tax Registration application vary depending on the date of the company’s license issuance. New entities must register for the Corporate Tax within three months of incorporation. Business activities without license need to be registered until 31 May 2024 to avoid penalties (AED 10,000).

 

Applicability

Who is affected?

Companies surpassing the 375,000 dirhams (approx. 93,000 euro) threshold are subject to a 9% corporate tax rate. The tax of 9% is paid in part, which exceeds this amount.

 

Exemptions

Exemption and the 0% tax still applies to:

– Companies having an income of up to 375,000 dirhams per year;

– Small businesses (non-financial or holding companies) which revenue does not exceed 3 million dirhams per year;

– Free Zone entities engaged exclusively in overseas business transactions. In any case, these entities must submit their accounts to the FTA, justifying this exemption;

– Personal Income – income from employment, investments, and real estate (without licensing requirements) will not be taxed. For UAE residents drawing a single income stream from salary, the current tax status remains unchanged with a tax rate of 0%.

 

Removal from the “grey list”

The Paris-based Financial Action Task Force (the international body that oversees the fight against money laundering) has removed the United Arab Emirates from its “grey list”, two years after it identified weaknesses in ability to tackle financial crime.

The decision is improving Emirates’ reputation, however in the light of recent changes, many businesses will start searching for alternative options. Especially for these who do not really reside in the UAE, the jurisdiction becomes less beneficial in international tax planning.

 

IBCCS TAX – we are at your disposal

If you are searching for an alternative solution to the structure involving the UAE, we are ready to advise.

For further enquiries, please contact us by email on info@ibccs.tax or call our office in Cyprus on +357 222 58 777.