UAE opens corporate tax registration for certain business categories

Levy will come into effect for companies whose financial year starts on or after June 1

The UAE has said that no corporate tax will apply on salaries or other personal income from employment. AFP
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The UAE has started early corporate tax registration for certain categories of companies operating in the country ahead of its implementation later this year.

The chosen companies will receive invitations from the Federal Tax Authority to register using the EmaraTax platform for digital services, the UAE’s regulator said in a statement on Sunday.

Following the early registration phase, which is available until May, the FTA will open the process for other companies and businesses.

Last January, the UAE introduced the federal corporate tax with a standard statutory rate of 9 per cent, which will come into effect for businesses whose financial year starts on or after June 1 this year.

The country issued the federal corporate tax law last year, bringing the income of companies exceeding Dh375,000 ($102,000) within the taxable bracket.

Taxable profits below that threshold will be subject to a 0 per cent rate.

No corporate tax will apply on salaries or other personal income from employment — be it in the government, semi-governmental entities or the private sector, the Ministry of Finance said.

“When registration opens, priority will be given to companies and businesses that have a financial year starting on June 1, 2023,” the FTA said on Sunday.

“The FTA will make sure to give ample time for companies and businesses to apply for registration and meet their legal obligations.”

The standard statutory corporate tax rate of 9 per cent positions the UAE competitively when compared with other financial centres and developed economies.

The average top corporate tax rate among the EU countries is 21.3 per cent, while it stands at 23.04 per cent among OECD countries, and 69 per cent in the G7, according to the Tax Foundation in Washington DC.

Corporate tax rates have declined over the past 40 years, with the worldwide average falling from more than 40 per cent to between 25 and 30 per cent, Tax Foundation data indicates.

“Since the announcement of corporate tax in the UAE, the FTA has intensified its efforts, in collaboration with the competent authorities, to develop procedures to implement it in accordance with the highest standards,” said Khalid Ali Al Bustani, FTA’s director general.

“The authority prioritises supporting all business sectors to comply with tax regulations and procedures through flexible mechanisms that align with international best practices.”

The FTA will provide more information about registration for corporate tax "in due course”, it said.

The UAE plans to keep the rate of corporate tax unchanged for the foreseeable future, Younis Al Khouri, undersecretary of the Ministry of Finance, told The National this month.

“The rate is agreed and fixed at 9 per cent … as long as the [corporate tax] law is there,” said Mr Al Khouri.

“If there is any review, we will announce it later but as of today, no change in the rate.”

Updated: January 22, 2023, 10:51 AM