On 9th December 2022, His Highness Sheikh Mohamed bin Zayed Al Nahyan, President of the United Arab Emirates, issued the Federal Decree-Law No.47 of 2022 on the Taxation of Corporations and Businesses. For financial years beginning on or after 1 June 2023, the UAE Corporate Tax Law serves as the legal foundation for the adoption and execution of a Federal Corporate Tax in UAE.
The implementation of Corporate Tax is meant to hasten the UAE’s development and transition while also assisting it in achieving its strategic goals. The UAE will solidify its position as a top jurisdiction for business and investment banks to the certainty of a competitive corporate tax structure that complies with international standards and its wide network of double taxation treaties.
The UAE Corporate Tax regime draws from best practices globally and contains concepts that are widely recognized and accepted due to the UAE’s status as a hub for global commerce and finance. This guarantees that the changes in UAE Corporate Tax policy will be transparent in its ramifications and easy to understand.
The Contents of the Decree Law
In the Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses, His excellency Sheikh Mohamed bin Zayed Al Nahyan has reviewed the constitution along with a number of Federal Laws and decrees that add up to a sum of 26. This includes 14 Federal Laws and 12 Federal Decree Laws.
The Federal Decree-Law No. 47 of 2022 discusses the imposition of corporate tax and applicable rates which are set as follows:
- 0% on the percentage of the Taxable Income that does not exceed the limit set out in a decision made by the Cabinet on a Minister’s recommendation
- 9% on Taxable Income beyond the threshold set out in a decision made by the Cabinet at the Minister’s recommendation
For Qualifying Free Zone Person/s, the corporate Tax will be imposed on rates stated below:
- On Qualifying Income, 0%
- On Non-Qualifying Income under Article 18 of the Decree Law, 9% on all taxable income.
How UAE Corporate Tax changes Will Affect businesses
The Decree Law also discusses a number of entities that are exempted from corporate tax which includes the likes of Government entities or Government controlled entities, people engaged in exaction business that meet Article 7 of the Decree Law, those involved in the Natural Resource Business (Non-Extractive) meeting Article 8 of the Decree Law, qualifying Investment Fund under Article 10 of this Decree-Law, qualifying Public Benefit Entity under Article 9 of this Decree-Law, and several others.
This above complicated list may not be easily comprehensible by the general audience, which is why Avyanco is here to simplify things. If you wish to check whether you or your business are exempted from this Decree-Law, aka, Corporate Tax in UAE, please feel free to contact us.
The Decree Law further discusses taxable people along with corporate tax bases in a list that spans over 18 pointers and sub-pointers. The decree law further discusses taxable entities or products which include State Sourced Income, Permanent Establishment/s, Family Foundations, and Partners in an Unincorporated Partnership among many others.
If you live in a freezone, you need to be aware of this Decree-Law as it also affects you. It discusses free zone people that qualify for tax along with those who are exempted from it. There are vague guidelines available that can be utilized by organizations like Avyanco to help their clients in the calculation of taxable income. If you do not want to make any mistakes and avoid hefty fines, it is best you let us, the professionals, do this job for you. This is further important as you might also fall in the category of exempted income along with qualifying for relief for small businesses.
Furthermore, you may be making expenditures that are totally deductible from taxation that you may not be aware of. This applies to business as well as interest expenditure. Similarly, people may be unaware of the non-deductible expenditure that may be mistaken for deductible, some of which have been altered in this decree-law. From the identification of payable corporate tax to tax group provisions, there are a lot of things that are discussed in this Decree-law that businesses and commercial entities need to be aware of.
The Decree Law further lays the foundation for Tax Registration and Deregistration, a vital aspect for everyone in UAE, especially corporate and business entities and individuals to be aware of. With the help of Avyanco, you can discover clarification for your tax returns in accordance with this decree-law along with how to declare them. From violations and penalties to Transitional Rules, the Decree-law has brought forth a plethora of changes in Corporate Tax in UAE just at the end of the year that may rattle many individuals and corporate entities.
How Avyanco Will Help Businesses on These New Changes in UAE Corporate Tax Law
Although a seemingly complicated and lengthy predicament, it is not if you let Avyanco help you out. With some of the best taxation and legal experts in UAE, Avyanco can help you makes sense of these recent regulations and help you figure out how much of this is applicable to you. For all you know, you might be missing out on a number of exemptions that you could otherwise benefit from. So, contact us today and let us help you make sense of things where it gets too complicated for you to handle with our corporate tax services to help you run your business effectively.
