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How to Check If Your Business Falls Within the Scope of UAE Corporate Tax?

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The UAE corporate tax (CT) is expected to take effect in June 2023, causing investors to consider if their firms will be affected. Conducting corporate tax assessments with the assistance of tax advisors in Dubai can assist investors in being appropriately prepared for the tax's implementation next year. The present assessments are based on the first information provided by the Ministry of Finance and the Federal Tax Authority, as the government has yet to adopt a UAE corporate tax law (FTA).

According to the most recent data, all enterprises in the UAE are subject to corporate tax. Certain sources of income, on the other hand, have been designated as non-taxable and exempt. The types of income that are exempted or excluded from the range of UAE corporate tax will be discussed here.

Consider the scope of UAE corporate tax

Except for exempted firms, the new corporate tax applies to all companies and commercial operations. All operations carried out by a legal entity are considered "business activities" by the government, and hence are subject to UAE corporate tax. On taxable income exceeding AED 375,000, the government will charge a corporate tax of 9%.

For taxable income up to AED 375,000, however, a 0% tax rate will apply. Furthermore, companies that meet specific criteria by the OECD Base Erosion and Profit Shifting project's Global Anti-Base Erosion Model Rules (Pillar Two) would pay a lower tax rate. Tax agents in Dubai can provide you with additional information about the corporate tax's scope and rates.

Look for non-taxable income

In the United Arab Emirates, not all income is subject to corporate tax. The UAE's Ministry of Finance has published a list of non-taxable income. However, it is advisable to seek the advice of tax specialists in Dubai to assess whether the income is non-taxable. In the United Arab Emirates, the following income is tax-free:

Individual salaries and income received through work will be exempt from the UAE corporate tax.
Real estate investments made by individuals will be exempt from the UAE corporate tax. This only applies if the individual is not required to get a commercial license or authorization to carry out the activity in the UAE.
Dividends, capital gains, and other income obtained as a result of owning shares or other securities in a personal capacity will be exempt from the UAE's corporate tax.
Interest and other income produced by an individual from bank deposits or savings schemes will not be subject to corporate tax in the UAE.

Other income types exempt from corporate tax

The following types of revenue will be exempt from the UAE corporate tax, according to the UAE Ministry of Finance:

Dividends and capital gains from eligible shareholdings earned by businesses in the UAE. A qualifying shareholding is an ownership position in a UAE firm or a foreign company that meets certain criteria outlined in the future UAE corporate tax code.
If the relevant criteria are met, qualifying intra-group transactions and reorganizations will be excluded from corporate tax in the UAE.

Condition for freelancers

The taxability of freelancer income is a mystery, as the UAE Ministry of Finance has said that income generated through employment is not subject to the UAE corporate tax. Income made under a freelancing license or freelance permission, on the other hand, will be subject to company tax. It's also worth noting that if the freelancer's annual net income is less than AED 375,000, they won't have to pay corporate tax. Tax agents in Dubai can help freelancers determine whether their earnings are taxable.

Condition for free zone companies

The UAE corporate tax will apply to companies operating in free zones. Free zone businesses, on the other hand, can continue to benefit from the current tax incentives as long as they meet all regulatory criteria. However, free zone businesses doing business on the mainland will be subject to the UAE corporate tax.

Rules for oil and gas industries

Businesses in the UAE's oil and gas industries, as well as those involved in the extraction of natural resources, will not be subject to corporate tax in the UAE. Because the new UAE corporate tax is imposed at the federal level, such enterprises will be exempt. These enterprises, on the other hand, are already liable to corporate tax at the emirate level and will continue to be so.

Talk to the best tax agents in Dubai, UAE

Even though the UAE corporate tax will not take effect until 2023, firms should be aware of the tax obligations and be prepared. Learning about their businesses' taxability will aid investors in preparing for and accepting the new tax without difficulty. Alchemist Accounting is one of the top competent corporate tax advisors for investors in Dubai. Alchemist Accounting is a major tax agent that has been approved by the FTA and has sufficient resources to provide corporate tax advice in the UAE. Alchemist Accounting can help you adapt to the new direct tax regime as smoothly as possible.