CORPORATE TAX

What is Corporate Tax?

Corporate tax is a tax imposed on the income or profit of corporations and other businesses. In the UAE, corporate tax has been introduced to enhance the country’s economic framework and ensure compliance with international tax standards. This tax is applicable to certain entities based on their income levels and business activities.

Scope of Corporate Tax

Corporate tax in the UAE primarily targets:

  • UAE-Based Companies: All companies registered and operating within the UAE.
  • Foreign Entities: Foreign companies that establish a taxable presence in the UAE through branches or subsidiaries.
  • Free Zone Companies: Companies operating in designated free zones may be subject to corporate tax depending on their activities and generated income.
Corporate Tax Calculations

Calculating corporate tax involves determining taxable income. The calculation process typically includes the following steps:

  1. Determine Gross Revenue: Identify total revenue generated from sales and services during the financial year.
  2. Identify Allowable Deductions: Subtract business expenses from gross revenue. Allowable deductions may include:
    • Operating expenses (salaries, rent, utilities, etc.)
    • Depreciation of assets
    • Interest on loans
    • Other relevant business costs
  1. Calculate Taxable Income:

Taxable Income=Gross Revenue−Allowable Deductions\text{Taxable Income} = \text{Gross Revenue} – \text{Allowable Deductions}Taxable Income=Gross Revenue−Allowable Deductions

  1. Apply Corporate Tax Rate: The standard corporate tax rate in the UAE is typically 9% for taxable income exceeding AED 375,000. For income below this threshold, the rate is 0%.

Turnover Limit

The corporate tax regime in the UAE has established specific turnover limits:

  • 0% Tax Rate: Applicable on taxable income up to AED 375,000, encouraging small and medium-sized enterprises (SMEs).
  • 9% Tax Rate: Applicable on taxable income exceeding AED 375,000.

Due Dates for Corporate Tax Registration and Filings

Timely registration and filing are crucial for compliance. Key deadlines include:

  • Corporate Tax Registration Deadline: Businesses must register for corporate tax within 12 months from the end of their financial year. For example, if your financial year ends on December 31, registration should be completed by December 31 of the following year.
  • Filing Due Date: Corporate tax returns must be submitted four months after the end of the financial year. For instance, for a financial year ending on December 31, the tax return would be due by April 30 of the following year.

Conclusion

Navigating corporate tax regulations can be complex, but APG Accounting & Bookkeeping Co. L.L.C is here to assist you every step of the way. Our expert team provides tailored solutions to ensure your business meets all compliance requirements while optimizing your tax obligations.