What are the new corporate tax rules in Dubai 2023?

What has changed in Dubai regarding corporate tax law?

Until June 2023, there was no corporate tax in Dubai or the wider United Arab Emirates (UAE). The implementation of corporate tax starting from June 1, 2023, marked a significant change in the tax landscape of the UAE, as it was the first time corporate taxes were introduced at the federal level.

The new corporate tax is set at 9% for qualifying businesses activities. This new tax policy reflects Dubai's commitment to diversifying its revenue streams and enhancing fiscal sustainability. The purpose of the new UAE corporate tax regime was not to specifically target small UAE businesses or prevent foreign investment.

To counter that, three key measures have been introduced:

1. Free zone exemption
2. Small business rate relief
3. Taxable income threshold

#1 What is free zone exemption?

In the United Arab Emirates (UAE), a 'free zone', also known as a free trade zone, is a designated geographic area that operates under specific regulations and incentives to attract foreign investment and promote economic activity. Each Emirate within the UAE has its own free zones, offering unique advantages to businesses operating within them.

A qualifying free zone person is defined as an owner of a company registered and has a qualifying business activity operating in free zone jurisdiction that has not elected to be subject to 9% corporate tax. They must comply with Economic Substance Regulations (ESR) and derives qualifying income.

#2 What is the small business rate relief?

Small business rate relief is aimed to support small businesses by reducing the corporate income tax they owe on their UAE taxable income, thus promoting business growth.

It has been announced that to qualify under small business rate relief and benefit from a 0% corporate income tax charge on profits, you will be required to have less than 3 million AED in revenue. This relief has only been announced up to 31st December 2026 and we cannot confirm if this will be extended past this point.

This relief was announced to be available for only ‘Resident Persons’ which are not part of any multinational groups or operating under free zone exemption.

#3 What is the tax-free threshold?

The introduction of tax-free thresholds allows small business with profit under 375,000 AED to be taxed at 0%. Any taxable income above this amount that does not qualify for the reliefs above will be taxable at 9%.

What actions do I need to take for my business under the new corporate tax regime?

Most businesses we speak to who are not registered for VAT or have VAT exemption have never had to keep financial statements in UAE, however going forward you will need to complete the following steps in line with your new UAE corporate tax liability:

1. Register as a corporation.
   
   
2. Implement accounting measures that comply with International Financial Reporting Standards (IFRS). We would recommend immediately beginning to invest in accounting software to keep your bookkeeping records up to date.
   
   
3. If you are applying for free zone exemption, you must get your financial statements audited annually, speak to advisers in the area or your tax adviser who can assist you.
   
   
4. File a corporation tax annually, these are due 9 months after your financial accounting year end.

Capture Accounting provide taxation advice to UK social media influencers in Dubai

Capture Accounting deals with many social media influencers thinking of moving to the United Arab Emirates. For advice on your particular situation, book a short consultation, or start a live chat.

FAQs about new corporation tax laws in Dubai

To learn more about the corporation tax changes check out our frequently asked questions below or contact us today:

How do I find out what my financial year is for tax?

To determine the financial year for a Dubai company, refer to the Memorandum and Articles of Association (MOA) or the company's incorporation documents. It's important to note that the financial year for a company in Dubai can vary, and it is not necessarily aligned with the calendar year (January to December).

Additionally, you can check with the Dubai Department of Economic Development (DED) or the Dubai Multi Commodities Centre (DMCC) if your company is registered with them.

Is the tax different for different Emirates?

No, this is a federal-level taxation regime; therefore, all Emirates will be subject to the same regulatory measures.

Will there be withholding tax for operating outside of UAE?

The rate for withholding tax has been set at 0%, and there is no requirement to file a return with the Ministry.

To learn more about taxation in Dubai, read our blogs here:

• Tax and VAT rules for influencers in Dubai
• Setting up a business in Dubai