20th December 2022
Following the UAE's issue of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses (referred to as the “Corporate Tax Law”), Faiyaaz Rajkotwala, Partner at MGI Salim Rajkotwala in Dubai, provides MGI Worldwide members with a useful round up of FAQs relating to the new Corporate Tax regulations in the United Arab Emirates.
What is Corporate Tax
Corporate Tax will be effective for all financial years beginning after 1st June 2023. For example, if Company A has a financial year end of 30th June, then their first tax year would be from the 1st of July 2023 to 30th June 2024. If Company B has a year end of 31st December, then their first tax year would be from 1st January 2024 to 31st December 2024.
Who must pay Corporate Tax?
Broadly, Corporate Tax applies to the following “Taxable Persons”:
- UAE companies and other juridical persons that are incorporated or effectively managed and controlled in the UAE
- Natural persons (individuals) who conduct a Business or Business Activity in the UAE as specified in a Cabinet Decision to be issued in due course; and
- Non-resident juridical persons (foreign legal entities) that have a Permanent
Establishment in the UAE:
Juridical persons established in a UAE Free Zone are also within the scope of Corporate Tax as “Taxable Persons” and will need to comply with the requirements set out in the Corporate Tax Law.However, a Free Zone Person that meets the conditions to be considered a Qualifying Free Zone Person can benefit from a Corporate Tax rate of 0% on their Qualifying Income.
Non-resident persons that do not have a Permanent Establishment in the UAE or that earn UAE sourced income that is not related to their Permanent Establishment may be subject to Withholding Tax (at the rate of 0%). Withholding tax is a form of Corporate Tax collected at source by the payer on behalf of the recipient of the income. Withholding taxes exist in many tax systems and typically apply to the cross-border payment of dividends, interest, royalties, and other types of income.
Find out more
For answers to all your questions related to the new UAE Corporate tax law, see Faiyaaz' full white paper HERE or contact Faiyaaz directly at email@example.com.
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