🔔 Corporate income tax applies to both local and foreign companies. Legal entities that are resident, incorporated or recognised in the UAE, including those in the Free Zone, are deemed to be resident. Companies that are managed and supervised in the UAE, even if they are registered abroad, are also treated as residents.

🔔 The existence of a registered office in the UAE can characterise the performance of activities. The making of management decisions in the Emirates, in particular the holding of a board meeting in the country, is also an indication that the company is tax resident. In addition, the existence of a bank account in the UAE and the presence of the general manager there are reasons for the company’s tax liability.

The calculation of assessable income involves accounting income, i.e., the profit, determined as income less business expenses. In the event of a loss, an organisation can offset up to 75% of the loss as taxable income in future financial years.

An organisation must register with the Federal Tax Administration (FTA) as a corporate taxpayer by submitting an application on the EmaraTax platform. After the first tax period, an organisation must submit a corporate tax return to the FTA to pay the tax. The deadline for filing the tax return and paying the tax is 9 months after the end of an company’s financial year. If an organisation is entitled to a tax exemption or benefit, it must declare this by submitting a tax return to the FTA after the first tax period.

A non- resident company is liable to tax if it has a permanent establishment in the UAE, receives income that originates in the country or is in any way connected to the country, or has income that relates to the permanent establishment or is deemed to be income earned in the UAE.

❗️Note: a permanent establishment is any fixed place of business in the territory of the UAE, explains Artem Malygin, director of the tax and legal department of Tenet Middle East Tax Consultants. A company is considered a resident of the UAE if it has a legal entity registered there, such as an office, factory or sales outlet, adds LWM managing director Lenar Rakhmanov. A dependent agent can be any entity in the UAE with which the company has a contractual agreement.

• Subsidiaries and parent companies can form a tax group if the parent company applies to the FTA. This requires 95% ownership of the parent in each subsidiary. At the same time, to create a tax group, the parent and subsidiary companies cannot be exempt from taxes.
• To pay the tax, the group must prepare consolidated financial statements. The parent company calculates the financial results, assets and liabilities of the individual subsidiaries. At the same time, the transactions between the individual subsidiaries and the parent company are not taken into account, claims Mr Malygin.
• In this context, the formation of a tax group can be useful for taxpayers with a large volume of intra-group transactions, for example, he clarifies. The tax group makes it easier to manage tax payments, as taxes are not paid on the profits of each individual company, but on the profits of all companies in the group, adds Mr Rakhmanov.

Large multinational companies with profits of more than €750M are taxed at 15%, in line with the agreement on a global minimum corporate tax rate. Companies operating in the UAE, on the other hand, cannot be taxed twice. Consequently, taxes paid by large multinationals are credited against any tax liability in the UAE.

The general tax rules apply with a tax rate of 9% for income above AED 375K and 0% for lower incomes. However, small companies and startups whose income does not exceed AED 3M in a tax period receive concessions in the form of simplified taxation.

Small businesses with an income of up to AED 3M are not considered to have taxable income and are exempt from the obligation to calculate and pay taxes and can file a simplified tax return, explains Mr Malygin.

The tax rate is 0% if the non-qualifying income is less than or equal to AED 375K per annum and 9% if the figures are higher. Non-qualifying income includes income from transactions with other companies in free zones, with the exception of income from non-exclusive activities, as well as income from qualifying activities – manufacturing and processing of goods and materials, reinsurance services, financing and leasing of aircraft, logistics services, etc.