A Guide to corporate tax and VAT compliance in the UAE

The United Arab Emirates (UAE) has established itself as a global business hub, attracting entrepreneurs and corporations with its business-friendly environment, strategic location, and progressive regulations. However, with the introduction of corporate taxes and value-added tax (VAT), understanding compliance has become essential for businesses to operate seamlessly. According to a recent article by Reuters, the UAE’s 9% corporate tax rate is among the lowest globally compared to countries like the UK (19%) and the US (21%). This competitive tax structure further reinforces the UAE’s position as an attractive destination for international businesses. In this guide, we’ll explore corporate tax and VAT compliance in the UAE, including insights from our tax expert Maria Klyukina and how Kozyk Consultancy supports businesses with accountancy services and corporate tax registration.

Understanding corporate tax in the UAE

Commonly known as corporate income tax or business profits tax, corporate tax is a direct levy imposed on the net income earned by corporations and businesses. By implementing this taxation system, the UAE aligns itself with many countries globally that have already established comprehensive corporate tax frameworks.

To understand the UAE’s new tax system better, let’s compare it with some other countries:

Country	Corporate Tax Rate
Saudi Arabia	20%
Qatar	10%
Bahrain	15%
Oman	15%
Kuwait	15%
Singapore	17%
Hong Kong	16.5%
Ireland	12.5%
United Kingdom	19%
United States	21% federal (varies by state)

Corporate Tax in the UAE

Standard Tax Rate: 9%

On 9 December 2022, the UAE introduced the Corporate Tax Law, establishing the legislative foundation for implementing a federal corporate tax system. This tax regime took effect for financial years commencing on or after 1 June 2023.

In a nutshell, unless exempted, taxable business income above AED 375,000 will incur a 9% statutory tax rate. Income below this threshold will not be taxed.

Taxable Income	Tax Rate
Not exceeding AED 375,000	0% tax on the portion of the taxable income
Exceeding AED 375,000	9% tax on the portion of the taxable income

The UAE introduced corporate tax as part of its economic diversification strategy. The tax applies to the net income of businesses, with certain exceptions and exemptions for specific entities and industries.

Feature	Description
Tax Rate	Standard rate of 9% on net income exceeding AED 375,000.
Exemptions	Applies to entities in free zones meeting compliance conditions, extractive businesses in the UAE, non-extractive natural resource businesses in the UAE, qualifying public benefit entities, qualifying investment funds, pension or social security funds (both public and private), and wholly owned and controlled UAE subsidiaries of certain exempt entities.
Threshold	No tax on income below AED 375,000.
Filing Requirement	Annual filing of corporate tax returns.

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https://mof.gov.ae/the-ministry-of-finance-announces-the-introduction-of-a-corporate-tax-in-the-uae/

https://u.ae/en/information-and-services/finance-and-investment/taxation/corporate-tax

https://www.reuters.com/world/middle-east/uae-begins-corporate-tax-roll-out-amid-diversification-push-2023-06-01/

Simon Einstein

2024-07-22 00:05