Insights

We are delighted to announce the recent establishment of Statura Group's office in Dubai. In line with our ongoing commitment to keep you updated, this is the inaugural edition of a series of newsletters from Statura Group focusing particularly on fiscal and tax compliance matters pertinent to the United Arab Emirates (UAE), as well as a variety of issues that we believe will captivate the interest of our corporate clients and individuals alike. Our primary goal is to keep you informed about the various legislative developments in the tax domain, ensuring you remain abreast of changes that may impact your operations or personal interests in the UAE.

Stay tuned for more insights and join us as we unravel the complexities of the UAE's fiscal landscape, ensuring you are well-prepared to thrive in this burgeoning market.

On December 9, 2022, the UAE Federal Government announced the enactment of Federal Decree-Law No. 47, commonly referred to as the Corporate Tax Law (CTL). This decree introduces a Corporate Tax (CT) on legal entities and their business activities. This tax will be applicable to financial years starting from or after June 1, 2023. Consequently, for those using the calendar year for their financial year, it will be applicable from the financial statements ending on December 31, 2024. Just to clarify, if the entity is incorporated on or after 1st June 2023, the CT will be applied from the incorporation date. The first Tax return must be filed within 30 September 2025. 

CTL (Article 11) stipulates that the following resident entities will be taxed on their global income:

• Companies and other legal entities headquartered or primarily managed in the UAE, including those in Free Zones.
• Individuals running a business or commercial activity in the UAE. (Specific commercial activities liable for the tax will be outlined in an upcoming Cabinet Decision).

Furthermore, non-residents will be taxed only on income earned within the UAE:

• Non-residents with a permanent establishment in the UAE.
• Non-residents generating income sourced from the UAE, as detailed in Article 13 of the CTL.

Companies in the UAE's Free Zones will also be taxed. However, if they qualify as 'Qualifying Free Zone Persons' (as per Article 18 of the CTL),they can enjoy a 0% tax rate on their 'qualifying income' (as defined in the Cabinet resolution n. 55 of 30th May 2023), given they meet certain conditions.

According to CTL (Article 4), several categories of entities are exempt from corporate tax, subject to certain conditions. These include:

• Governmental entities and/or those controlled by the government.
• Entities operating in both extractive and non-extractive natural resources businesses.
• Designated public benefit entities.
• Designated investment funds.
• Pension and social security funds.
• Entities owned by other exempt entities.

The CT will be calculated on net profit, derived from financial statements that adhere to international accounting standards and the modifications outlined in Article 20 of the CTL.

The general CT rate is 9% for taxable profits above AED 375,000. Profits below this threshold will be taxable at 0% tax rate. These rates were announced by Cabinet Decision 116 of 2022. However, 'Qualifying Free Zone Persons' will enjoy a 0% tax rate on qualifying income and a 9% rate on other income.

Articles 22 and 23 of the CTL introduce tax exemptions on dividends and capital gains, provided certain conditions are met.

A withholding tax on UAE source income received by non-residents has been introduced in CTL (Article 45). The rate is currently set at 0% but might be amended in future Cabinet Decisions.

Every taxable entity must register on the Federal Tax Authority Portal to obtain a Corporate Tax Registration Number. Some exempt entities might also need to register. All taxable entities are obligated to submit an annual tax return and pay any due taxes within nine months post the tax year's end.

The implementation of the CT marks a significant shift in the UAE's fiscal landscape, as the nation moves away from being viewed as an offshore jurisdiction in global dialogues. It's crucial for all stakeholders to quickly assess their standing, especially with upcoming Cabinet and Ministerial Decisions set to provide clarity on certain ambiguous aspects of the CTL.

Whether you have an established business or are planning to set up a new one, Statura Group stands ready to assist you with preliminary tax assessments, CT registration, and ongoing filings.