There is a myth about UAE ‘There is no Tax in UAE’, like a myth, the saying is not true, just because without taxation a Government cannot function. UAE does not impose income tax in most sectors but the tax levied is more than 50% on oil business and for entertainment also tax is high. Dubai charges more than 10% for hotel services and also service tax is high on Restaurant bills.
Moreover, the import duties on certain goods that are odd in Islamic law are also taxed high. It is through this exorbitant tax on certain products and services, the majority of people are made income tax-free.
In 2018, the United Arab Emirates for the first time enacted a VAT tax, which levied a 5% surcharge on all consumer purchases. The government then declared in January 2022 that a 9% corporate tax would go into effect the following year.
What is the 2023 Corporate Tax?
Corporate tax is a direct tax imposed on net income or profit from the business. The UAE corporate Tax came into effect on June 1st, 2023. UAE’s corporate tax will be 9% on the profits of businesses above 375000 AED and businesses less than that have to pay 0% tax.
Objectives of UAE Corporate Tax 2023:
- By introducing the CT, the UAE aims to cement its position as a leading global hub for business and investment
- accelerate its development and transformation to achieve its strategic objectives·
- reaffirm its commitment to meeting international standards for tax transparency and preventing harmful tax practices.
Exempted from Taxation
- Businesses engaged in natural resources extraction are exempted from Corporate Taxation and they have to continue the existing taxation
- CT won’t be applicable to dividends or capital gains that a UAE company makes from its qualifying shareholdings.
- Qualifying intra-group transactions and reorganizations will not be subject to CT.
Impact on businesses operating in the UAE
- The new tax intends to increase UAE the share of the non-oil revenue budget
- Will increase the revenue base of the country, it can also become a key player in international business by adhering to international standards.
- The change in taxation policy cab enhance financial growth and ensure sustainable growth
- It is a futuristic step towards business credibility.
Calculation
The calculation of CT is based on net profit or loss. In the event of a business loss, up to 75% of the value could be deducted from future years’ taxable income.
