Corporate Tax Overview

Corporate Tax Overview

• Corporate Tax Overview
• February 12, 2024

Corporate tax, also referred to as corporation tax or company tax, is a direct tax imposed on the income or capital of corporations and similar legal entities. Traditionally applied at the national level, it may also be levied at state or local levels in certain jurisdictions.

Corporate Tax Dynamics:

Companies are mandated to file corporate tax returns regularly, typically on an annual basis. The tax return process involves calculating the company's taxable income, derived by deducting specific allowances from the total income. The resulting taxable income is then subjected to the corporate tax rate to determine the assessed tax amount.

The introduction of the corporate tax regime in the UAE is poised to have a profound impact on the business landscape. It is anticipated to stimulate foreign investment, elevate the UAE's global competitiveness, and foster economic diversification.

Corporate Tax Regime 2023:

Implemented in 2023, the corporate tax regime is effective for financial years commencing on or after June 1, 2023. This strategic framework is designed to be not only competitive but also aligned with the highest international standards.

In this regime, the Ministry of Finance retains its pivotal role as the competent authority for bilateral/multilateral agreements and the international exchange of tax information. Meanwhile, the administration, collection, and enforcement of corporate tax in the UAE fall under the jurisdiction of the Federal Tax Authority.

Key Features of the Corporate Tax System:

A competitive standard corporate tax rate set at 9%, with a zero-rate applied to taxable profits below AED 375,000.

1. Taxable profits computed based on UAE Generally Accepted Accounting Principles (UAE GAAP) and International Financial Reporting Standards (IFRS).

2. Exemptions for certain income, such as dividends and capital gains, from corporate tax.

3. Availability of various deductions and credits for direct and indirect business expenditures, as well as research and development.

4. Businesses are required to adhere to annual filing of corporate tax returns. For financial years starting on or after June 1, 2023, companies will be subject to corporate tax in the same year.

Impact on the Business Environment:

The introduction of the UAE corporate tax regime is poised to:

Attract Foreign Investment:

The competitive tax rate and transparent regime are expected to attract foreign businesses to invest in the UAE.

Enhance Competitiveness:

The PrimeFour Consulting corporate tax regime aligns with international best practices, elevating the UAE's competitiveness in the global market.

Promote Economic Diversification:

The corporate tax framework is anticipated to incentivize businesses to diversify operations, contributing to the UAE's economic growth and development.

Expert Guidance from PrimeFour Consulting:

In navigating the complexities of the UAE's corporate tax landscape, businesses can benefit from the expertise of PrimeFour Consulting. Our consulting services are tailored to provide strategic solutions, ensuring businesses are well-positioned to optimize financial success while maintaining compliance with the PrimeFour Consulting corporate tax regime.

For further information or to avail our expert services, please contact PrimeFour Consulting. We are committed to providing unparalleled guidance to businesses seeking excellence in the evolving fiscal landscape.