While many people tend to focus on the majestic height of Dubai buildings and free zones, it is much more than that. Nonetheless, starting from 1st June 2023, the implementation of the corporate tax in UAE raised some issues among the companies operating in the emirate. In the following, the guide clears up the essential aspects of the new tax scheme so that you will be capable of making appropriate decisions.
Who needs to pay corporate tax in Dubai?
It is also important for the reader to note that not all companies operating within Dubai are subjected to corporate tax in UAE. Here’s a breakdown to help you determine your obligation
Free Zone Companies: Companies operating within free zones have been accorded some form of exemption, most especially a corporate tax exemption period that may last between 30 to 50 years. Nevertheless, it could be different, so it is always wise to check with your free zone authority to see whether it has made any exceptions.
Qualifying Small Businesses: Companies that have the income of AED 375,000 or less in a year after excluding all allowable business expenses are not required to pay corporate tax.
What happens when a company does not fall under exemptions?
If your company does not fall under any of the above exemptions, you will be taxed at a standard rate of 9% of your corporate income.
To elaborate, this type of tax is only charged on the extra five percent of your taxable income in excess of AED 375,000.
Here’s an example: Let’s assume your company earns a taxable income of AED 500,000 per annum. On the first AED 375,000, the company will not be liable to tax and only the balance amount of AED 125,000 will be chargeable to tax at the rate of 9% which results in corporate tax liability AED 11,250.
What is taxable profit and taxable income?
This is your total income less deductible business expenses meaning your total revenues that you charge your taxes from. Depending on your taxable income, it is wise to further adjust these profits based on the certain additions and deductions provided by the UAE corporate tax law. Consulting a tax advisor is advised to figure out how to deal with these issues.
Conclusion
That said this guide may be a good starting point for general familiarity However, it is advised to seek professional advice before proceeding any further from a registered agent or advisor in the UAE who specialises in corporation taxes. They can give you personalised suggestions as to the most beneficial legal model for your particular business type and the financial condition you or your company is in.
You need to learn when to pay the taxes and when not, record all taxes paid, and in the course of record-keeping, seek help from persons well-conversant with the new corporate tax in Dubai. As always, it’s best to be proactive in managing taxes and compliance, otherwise it might end up heaping more tax woes and reduce your businesses potential in the emirate.
