Executive Summary

Of Taxation Of
Corporations And
Businesses

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CORPORATE TAX
Corporate tax has been imposed on tax periods commencing on or after 1st June, 2023 on the taxable income in the
UAE at the following rates;
0% if the taxable income does not exceed 375,000 AED
9% where taxable income exceeds 375,000 AED

GENERAL RULES FOR DETERMINING TAXABLE INCOME

The Taxable Income of each Taxable Person shall be determined separately, on the basis of adequate, standalone
financial statements prepared for financial reporting purposes in accordance with accounting standards accepted in the
State.
The taxable income shall be accounting income of the tax year adjusted by the followings:

Any unrealised gain or loss

Exempt Income
Reliefs as provided under The Federal Decree
Deductions as per The Federal Decree
Transactions with Related Parties and Connected Persons
Tax Loss relief
Any incentives or special reliefs for a Qualifying Business Activity as specified in a decision issued by the Cabinet at the
suggestion of the Minister.
Any income or expenditure that has not otherwise been taken into account in determining the Taxable Income
Any other adjustments as may be specified by the Minister

DEDUCTIBLE EXPENDITURE
Expenditure incurred wholly and exclusively for the purposes of the Taxable Person’s Business that is not capital in
nature shall be deductible in the Tax Period in which it is incurred.
In case single expenditure is incurred for more than one purposes, the proportionate expenditure (as per fair and
reasonable basis) attributable to person’s business shall be allowed.
Entertainment expenditure deduction for the purposes of taxable income calculation shall be limited to 50% of the
expenditure incurred in the tax period.

NON-DEDCUTIBLE EXPENDITURE
No deduction shall be allowed in the following cases:
Donations, grants or gifts made to an entity that is not a Qualifying Public Benefit Entity.
Fines and penalties, other than amounts awarded as compensation for damages or breach of contract.
Bribes or other illicit payments.
Dividends, profit distributions or benefits of a similar nature paid to an owner of the Taxable Person.
Amounts withdrawn from the Business by a natural person who is a Taxable Person under The Federal Decree or a
partner in an Unincorporated Partnership.
Corporate Tax imposed on a Taxable Person under The Federal Decree.
Input Value Added Tax incurred by a Taxable Person that is recoverable under the relevant Decree.
Tax on income imposed on the Taxable Person outside the State.
Such other expenditure as specified in a decision issued by the Cabinet at the suggestion of the Minister.

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EXEMPT INCOME
Dividends and other profit distributions received from a juridical person that is a resident person and Participating
Interest in a foreign juridical person.
Any other income from a participating Interest.
Income of a foreign Permanent Establishment on certain conditions.
Income Derived by a Non-Resident person from operating aircrafts or ships in international transportation.

TAXABLE PERSON
Corporate Tax applies to all Taxable Persons, including Resident and Non-Resident Persons except following:
A Government Entity & A Government Controlled Entity
A Person engaged in an Extractive Business and Non-Extractive Business, that meets the conditions as specified in The
Federal Decree.
A Qualifying Public Benefit Entity

Resident Person:
A juridical person that is incorporated or otherwise established or recognized under the applicable legislation of the
State, including a Free Zone Person and under the applicable legislation of a foreign jurisdiction that is effectively
managed and controlled in the State.
A natural person who conducts a Business or Business Activity in the State.
Any other Person as may be determined in a decision issued by the Cabinet.

Non-Resident Person:
Is a Person who is not a Resident Person and that either:
Has a Permanent Establishment in the State.
Derives State Sourced Income.
Has a nexus in the State as specified in a decision issued by the Cabinet.

CORPORATE TAX BASE

A Resident Juridical Person, is subject to Corporate Tax on its Taxable Income derived from the State or from outside the
State.
A Resident Natural Person is subject to Corporate Tax on its Taxable Income derived from the State or from outside the
State in so far as it relates to the Business or Business Activity conducted in the State.
A Non-Resident Person will be subject to Corporate Tax on the following;
The Taxable Income from a Permanent Establishment in the State.
State Sourced Income that is not attributable to a Permanent Establishment
The Taxable Income attributable to the nexus of the Non-Resident Person in the State, to be determined by the Cabinet.

STATE SOURCED INCOME

A Non-Resident Person will be subject to Corporate Tax on the following;
Income derived from a Resident Person.
Income derived from a Non-Resident Person and a Permanent Establishment of that Non-Resident Person in the State.
Any other income accrued in or derived from activities performed, assets located, capital invested, rights used, or
services performed or benefitted from in the State.
Income from the sale of goods, provision of services, contracts wholly or partly performed, movable or immovable
property, disposal of shares or capital, use or right to use, any intellectual or intangible property, Insurance or reinsurance
premiums, and Interest Income subject to some conditions.

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PERMANENT ESTABLISHMENT
Permanent Establishment of non-resident in the State means a fixed or permanent place to conduct Business Activities,
a person has and habitually exercises an authority to conduct a Business or any form of nexus to be determined by the
Cabinet.

QUALIFYING FREE ZONE PERSON

A Qualifying Free Zone Person is a Free Zone Person that meets all of the following conditions;
Maintains adequate substance in the State.
Derives Qualifying Income as specified in a decision issued by the Cabinet at the suggestion of the Minister.
Has not elected to be subject to Corporate Tax under The Federal Decree.
Complies with conditions for arms length basis transactions and transfer pricing documentation under the federal
decree.
Meets any other conditions as may be prescribed by the Minister.
Exemption period of Qualifying Free Zone Person shall be limited to tax incentive period as in the applicable legislation
of Free Zone in which the person is registered.
Such exemption period may be extended as stipulated by the Cabinet but cannot be extended beyond a maximum of
50 years in total.

SMALL BUSINESS RELIEF

A Taxable Person that is a Resident Person may elect to be treated as not having derived any Taxable Income for a Tax
Period where the revenue does not exceed the limits (to be specified by the Minister) and the person meets all other
conditions imposed by the Minister.

TAX GROUP
A Resident Person as a “Parent Company” can apply to form a Tax Group with one or more other Resident Persons,
each referred to as a “Subsidiary”,
The Parent Company owns at least 95% (ninety-five percent) of the share capital of the Subsidiary, either directly or
indirectly through one or more Subsidiaries.
The Parent Company holds at least 95% (ninety-five percent) of the voting rights in the Subsidiary, either directly or
indirectly through one or more Subsidiaries.
The Parent Company is entitled to at least 95% (ninety-five percent) of the Subsidiary's profits and net assets, either
directly or indirectly through one or more Subsidiaries

TAX LOSS RELIEF

Tax loss of one tax period can be adjusted against taxable income of the subsequent tax periods.
The amount of Tax Loss used to reduce the Taxable Income for any subsequent Tax Period cannot exceed 75% (seven-
ty-five percent) or any other percentage as maybe specified.
A Taxable Person cannot claim Tax Loss relief for:
Losses incurred before the date of commencement of Corporate Tax.
Losses incurred before a Person becomes a Taxable Person under The Federal Decree.
Losses incurred from an asset or activity the income of which is exempt, or otherwise not taken into account under The
Federal Decree.

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CALCULATION AND SETTLEMENT OF CORPORATE TAX
Calculation of corporate tax shall be quantified in the United Arab Emirates Dirham. Any amount quantified in another
currency must be converted at the applicable exchange rate set by the Central Bank of the United Arab Emirates.

WITHHOLDING TAX AND TAX CREDIT

The concept of withholding tax has been introduced via The Federal Decree however, rate of withholding tax is currently
0% from the gross amount of payment.
The maximum withholding tax credit shall be lower of;
The amount of withholding tax deducted
The Corporate Tax due
Any excess amount of withholding tax deducted that could not be adjusted shall be refunded to the taxable person.

FOREIGN TAX CREDIT

Lower of foreign tax paid on the relevant income or corporate tax due on that income shall be the amount of foreign tax
credit for that taxable person.
Any unadjusted amount cannot be carried forward or carried back.

CORPORATE TAX PAYMENT & REFUND

A Taxable Person must settle the Corporate Tax Payable within (9) nine months from the end of the relevant Tax Period.
A Taxable Person may make an application to the Authority for a Corporate Tax refund in accordance with the provisions
of the Tax Procedures Law in the following circumstances:
The Withholding Tax Credit available to a Taxable Person exceeds the Taxable Person’s Corporate Tax Payable.
Where the Authority is otherwise satisfied that the Taxable Person has paid Corporate Tax in excess of the Taxable
Person’s Corporate Tax Payable.

TAX RETURN
A Taxable Person must file a Tax Return, as applicable, to the Authority in the form and manner prescribed by the
Authority not later than (9) nine months from the end of the relevant Tax Period, or by such other date as directed by the
Authority.
In case of tax group, the parent company shall file the tax return on behalf of tax group.

FINANCIAL STATEMENTS
The Authority has been given power to compel taxable persons to submit financial statements for a tax period in order
to determine taxable income and resultant corporate tax liability.

TAX PERIOD
A Taxable Person’s Tax Period is the Financial Year or part thereof for which a Tax Return is required to be filed and shall
be the Gregorian calendar year, or the (12) twelve-month period for which the Taxable Person prepares financial state-
ments.
A Taxable Person can make an application to the Authority to change the start and end date of its Tax Period, or use a
different Tax Period, subject to conditions to be set by the Authority.

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