Tax & VAT Advisory
Corporate Income Tax
What is Corporate Tax?
Corporate Tax is a direct tax imposed on the net income of corporations and other businesses. It is also known by other terms such as “Corporate Income Tax” or “Business Profits Tax” in various jurisdictions. This type of tax applies to both domestic and foreign entities engaged in business activities within a specific tax jurisdiction.
As of December 9, 2022, the UAE has introduced a Federal Corporate Tax Law, specifically Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses. This legislation establishes the framework for the implementation of a Federal Corporate Tax in the UAE, effective for financial years beginning on or after June 1, 2023.
The primary objective behind the introduction of Corporate Tax is to support the UAE in achieving its strategic goals, fostering development, and facilitating transformation. The adoption of a competitive Corporate Tax regime aligned with international standards, combined with the extensive network of double tax treaties, aims to solidify the standing of the UAE as a premier jurisdiction for business and investment.
Given the UAE's status as a global business hub and financial center, the Corporate Tax regime draws on international best practices and incorporates widely recognized and accepted principles. This approach ensures that the UAE's Corporate Tax system is transparent, easily comprehensible, and aligns with global standards. It reflects a commitment to clarity and adherence to international norms, contributing to the attractiveness of the UAE for businesses and investors.
Who is Subject to Corporate Tax
UAE Companies and Juridical Persons
This pertains to businesses that are incorporated or effectively managed and controlled within the UAE.
Natural Persons (Individuals)
Individuals conducting a business or business activity in the UAE, as specified by a Cabinet Decision, are also subject to Corporate Tax
Non-Resident Juridical Persons
Foreign legal entities having a Permanent Establishment in the UAE fall under the scope of Corporate Tax. The concept of Permanent Establishment is explained further in Section 8.
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