The UAE will impose CT on the profits of mainland businesses. The CT rates are 0% for taxable profits up to AED 375,000 and 9% for taxable income above AED 375,000. Taxable profits are equal to a business’s income less the cost of goods sold, wages and other employee compensation, interest, and depreciation. The tax will become applicable either on 1 July 2023 or on 1 January 2024.
CT will apply to:
- all businesses and individuals conducting business activities under a commercial licence in the UAE
- free zone businesses (The UAE CT regime will continue to honour the CT incentives currently being offered to free zone businesses that comply with all regulatory requirements and that do not conduct business set up in the UAE’s mainland.)
- Foreign entities and individuals only if they conduct a trade or business in the UAE in an ongoing or regular manner
- Banking operations
- Businesses engaged in real estate management, construction, development, agency and brokerage activities.
Exemptions from CT
Below are the rules regarding exemptions from the corporate tax.
- Businesses engaged in the extraction of natural resources are exempt from CT as these businesses will remain subject to the current Emirate level corporate taxation.
- Dividends and capital gains earned by a UAE business from its qualifying shareholdings will be exempt from CT.
- Qualifying intra-group transactions and reorganizations will not be subject to CT, provided the necessary conditions are met.
Additionally, CT will not apply to:
- an individual earnings salary and other employment income, whether received from the public or the private sector
- interest and other income earned by an individual from bank deposits or saving schemes
- a foreign investor’s income earned from dividends, capital gains, interest, royalties and other investment returns
- investment in real estate by individuals in their personal capacity
- dividends, capital gains and other income earned by individuals from owning shares or other securities in their personal capacity.
