CORPORATE TAX (CT)

In January 2022, Ministry of Finance announced that it will introduce federal Corporate Tax (CT) on the net profits of businesses. The tax will become applicable either on 1 June 2023 or on 1 January 2024, depending on the financial year followed by the business. CT will be applied across all the emirates.

What is corporate tax (CT)?

Corporate tax, often referred to as Corporate Income Tax or Business Tax, is a form of direct tax levied on the Net Income or Profit of Corporations and Other Business Entities. Corporate Tax in Dubai is part of the UAE’s federal corporate tax system, which was introduced in January 2022 and became applicable either on 1 June 2023 or on 1 January 2024, depending on the financial year followed by the Business. CT is governed by Federal Decree-Law No.60 of 2023.

Here are some key points about the corporate tax in Dubai

Tax Base: It’s calculated on the company’s profits, which include revenue minus costs and expenses.
Tax Rate: Generally, businesses will be subject to a 9% CT rate.
Filing: Companies are typically required to file an annual tax return and pay the amount of tax due.
Use: The revenue generated from corporate taxes is used to fund public services and infrastructure.
Scope: CT applies to all businesses and individuals conducting business activities under a commercial license in the UAE.
Free Zone Businesses: The UAE CT regime will continue to honor the CT incentives currently being offered to free zone businesses that comply with all regulatory requirements and do not conduct business in the UAE’s mainland1.

For more detailed information, you can refer to the official portal of the UAE Government or the Ministry of Finance – Corporate tax (CT) | The Official Portal of the UAE Government

Vision Taxation is an approved CT Consultant and Tax Agent by the Federal Tax Authority (FTA) in UAE with a perfect blend of core financial expertise we will assist you in Corporate Tax

Our Corporate Tax (CT) Services

CT Registration

Vision Taxation offers expert CT Registration Services in Dubai, ensuring businesses comply with local tax regulations efficiently. Our Experienced Team provides Personalized Support throughout the Registration Process, Minimizing Administrative Hassles and Optimizing Tax Benefits. Trust Vision Taxation for reliable and professional CT registration in Dubai.

CT Rate

Vision Taxation offers guidance on Corporate Tax (CT) rates tailored to Dubai’s Regulatory Framework. We provide expert advice on how to navigate the CT rate applicable to your Business, Ensuring Compliance While Optimizing Tax Liabilities. Our team stays updated on the latest tax policies and can help you understand how the CT rate impacts your Financial Planning and Reporting.

Exempt Persons & Exemption from CT

Vision Taxation provides detailed insights into exemptions from Corporate Tax (CT) for eligible entities in Dubai. They assist clients in identifying exempt persons, such as certain Government Bodies, Non-Profit Organizations, and Other Specific Categories, ensuring that Businesses fully understand their exemption status. With Vision Taxation’s expertise, you can navigate these exemptions efficiently and ensure compliance with local tax regulations.

Taxable Persons and Tax Base

A taxable person is defined as any individual or entity engaged in economic activities who is registered or required to be registered for VAT purposes. This includes businesses, freelancers, and other entities that supply goods or services subject to VAT. The tax base refers to the value upon which VAT is calculated, which encompasses the total consideration received or expected to be received for a taxable supply, including any additional charges or fees. Proper determination of the tax base is crucial for accurately calculating VAT liability and ensuring compliance with VAT regulations.

Free Zone Person

A Free Zone Person is an individual or entity operating within one of the designated free zones who benefits from specific tax privileges under the UAE VAT framework. These free zones are special economic areas that offer incentives such as 100% foreign ownership and tax exemptions. Free Zone Persons are subject to VAT in the same manner as other taxable persons, but they may have distinct obligations and rights depending on their free zone’s regulations and the nature of their transactions. They must adhere to VAT registration requirements, file VAT returns, and comply with VAT regulations, while leveraging the unique advantages provided by their free zone status.

Taxable Income

Taxable Income refers to the portion of an individual’s or entity’s income that is subject to taxation under the relevant tax laws. It includes all forms of income, such as wages, salaries, business profits, rental income, and investment earnings, minus allowable deductions, exemptions, and allowances. For individuals, taxable income is often calculated after subtracting personal allowances and deductions from total income. For businesses, it typically involves deducting allowable expenses from gross income to determine net profit. Accurate calculation of taxable income is essential for determining the correct amount of tax liability and ensuring compliance with tax regulations.

Exempt Income

Exempt Income refers to specific types of income that are not subject to taxation under relevant tax laws. This can include certain government benefits, specific interest income, or income derived from certain investments or activities that are explicitly exempted by tax regulations. For example, in some jurisdictions, income from certain types of municipal bonds or from charitable activities may be exempt. The rules governing exempt income vary depending on the tax legislation in place, and individuals or entities must be aware of these exemptions to ensure accurate tax reporting and compliance.

Small Business Relief

Small Business Relief refers to various tax relief measures designed to support and alleviate the financial burden on small businesses. These measures can include reduced tax rates, exemptions, or allowances that lower the tax liability for eligible small enterprises. Such relief often aims to encourage entrepreneurship, support business growth, and enhance the economic viability of small businesses. In many jurisdictions, small business relief may also involve simplified reporting requirements or special programs to provide additional financial support and promote economic stability within the small business sector.

Allowed and Disallowed Expenditure

Allowed and Disallowed Expenditure refers to the classification of expenses for tax purposes, determining which costs are deductible and which are not.

Allowed expenditure includes costs that are necessary and directly related to earning taxable income. These expenses are eligible for deductions and can reduce the taxable income of an individual or business. Common examples include operational costs like rent, salaries, utilities, and raw materials.

Disallowed expenditure consists of costs that are not permitted as deductions under tax laws. These expenses do not contribute directly to generating income and include personal expenses, fines, and penalties. Such expenditures are excluded from reducing taxable income, and businesses must carefully distinguish between allowable and disallowed costs to ensure accurate tax reporting and compliance.

Tax Losses & Tax Groups

Tax Losses refer to situations where a business or individual’s deductible expenses exceed their income, resulting in a negative taxable income. These losses can often be carried forward to offset future taxable income, reducing future tax liabilities. In some jurisdictions, tax losses can also be carried back to offset past taxable income, potentially resulting in a tax refund. The specific rules for handling tax losses vary by tax jurisdiction and can significantly impact tax planning and strategy.

Tax Groups involve consolidating the tax positions of multiple entities within a corporate group. In many tax systems, related companies can elect to form a tax group, allowing them to consolidate their taxable profits and losses. This means that profits and losses of individual group members can be offset against each other, potentially reducing the overall tax liability of the group. Tax grouping aims to simplify tax administration and provide financial benefits by allowing more efficient use of tax losses and deductions across the group.

CT Return

CT Return refers to the Corporate Tax Return that businesses are required to file with tax authorities. This return reports the company’s taxable income, allowable deductions, and other relevant financial information for a specific tax period. It is used to determine the total tax liability based on the business’s financial performance and is typically submitted annually.

Calculation of CT Payable

Calculation of CT Payable involves determining the amount of corporate tax that a business owes based on its taxable income. The process includes:

Calculating Taxable Income: Start with gross income and subtract allowable deductions and exemptions to arrive at taxable income.
Applying Tax Rates: Apply the relevant corporate tax rates to the taxable income to compute the preliminary tax liability.
Adjustments and Credits: Account for any tax credits or adjustments, such as previous losses carried forward, to reduce the total tax payable.
Determining Final Liability: The result is the amount of corporate tax payable, which must be reported on the CT return and paid to the tax authorities.

Accurate preparation and calculation are crucial for compliance and to avoid penalties.

Objectives of CT

The objectives of Corporate Tax (CT) include

Revenue Generation: CT helps fund Government Initiatives by Taxing the Profits of Businesses.
Fairness: Ensures that companies contribute a fair share to the Economy Based on Their Earnings.
Economic Stability: Provides a Stable Source of Revenue for Public Services and Infrastructure.
Encouragement of Compliance: Motivates Businesses to adhere to Financial Regulations and Maintain Transparent Accounting Practices.