Corporate Tax

Corporate Tax Services in UAE

Dubai, a prominent global business and financial hub, has established a reputation for its favourable tax regime that attracts businesses and investors from around the world. Dubai’s tax system is designed to encourage economic growth and investment by offering a low and simplified corporate tax structure.

Corporate Tax applies to the following “Taxable Persons”:
  • UAE companies and other juridical persons that are incorporated or effectively managed and controlled in the UAE;
  • Natural persons (individuals) who conduct a Business or Business Activity in the UAE;
  • Non-resident juridical persons (foreign legal entities) that have a Permanent Establishment in the UAE;

Juridical persons established in a UAE Free Zone are also within the scope of Corporate Tax as “Taxable Persons” and will need to comply with the requirements set out in the Corporate Tax Law. However, a Free Zone Person that meets the conditions to be considered a Qualifying Free Zone Person can benefit from a Corporate Tax rate of 0% on their Qualifying Income.

Non-resident persons who do not have a Permanent Establishment in the UAE or who earn UAE-sourced income that is not related to their Permanent Establishment may be subject to Withholding Tax (at the rate of 0%). Withholding tax is a form of Corporate Tax collected at source by the payer on behalf of the recipient of the income. Withholding taxes exist in many tax systems and typically apply to the cross-border payment of dividends, interest, royalties, and other types of income.

Resident Person

Companies and other juridical persons that are incorporated or otherwise formed or recognized under the laws of the UAE will automatically be considered Resident Person for Corporate Tax purposes. This covers juridical persons incorporated in the UAE under either mainland legislation or applicable Free Zone regulations and would also include juridical persons created by a specific statute (e.g. by a special decree).

Foreign companies and other juridical persons may also be treated as Resident Persons for Corporate Tax purposes where they are effectively managed and controlled in the UAE. This shall be determined with regard to the specific circumstances of the entity and its activities, with a determining factor being where key management and commercial decisions are in substance.

Natural persons will be subject to Corporate Tax as a “Resident Person” on income from both domestic and foreign sources, but only insofar as such income is derived from a Business or Business Activity conducted by the natural person in the UAE. Any other income earned by a natural person would not be within the scope of Corporate Tax.

Non-Resident Person

Non-Resident Persons are juridical persons who are not Resident Persons and:

  • have a Permanent Establishment in the UAE; or
  • derive State Sourced Income.

Non-resident persons will be subject to Corporate Tax on Taxable Income that is attributable to their Permanent Establishment (which is explained under Section 8).

Certain UAE-sourced income of a Non-Resident Person that is not attributable to a Permanent Establishment in the UAE will be subject to Withholding Tax at the rate of 0%.

Permanent Establishment

The concept of Permanent Establishment is an important principle of international tax law used in corporate tax regimes across the world. The main purpose of the Permanent Establishment concept in the UAE Corporate Tax Law is to determine if and when a foreign person has established sufficient presence in the UAE to warrant the business profits of that foreign person to be subject to Corporate Tax.

Corporate Tax will be levied at a headline rate of 9% on Taxable Income exceeding AED 375,000. Taxable Income below this threshold will be subject to a 0% rate of Corporate Tax.

Dubai’s combination of a pro-business environment, strategic location, and favourable tax policies positions Dubai as an ideal destination for businesses and entrepreneurs looking to thrive in a dynamic and tax-efficient ecosystem. By understanding the intricacies of Dubai’s corporate tax system, companies can make informed decisions that contribute to their success in this flourishing business hub.

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