Common Questions Related to Corporate Tax in Dubai - Alforel

Common Questions Related to Corporate Tax in Dubai

What is corporate tax in Dubai?

A type of direct tax known as Corporate Tax (CT) is imposed on the net income or profit that corporations and other entities make from their operations. In certain countries, corporate tax is also known as “business profits tax” or “Corporate Income Tax (CIT).” The CT regime in Dubai was designed to reduce the burden of compliance for businesses while integrating global best practices.

What is Dubai’s corporate tax rate?

For taxable income above AED 375,000, the corporate tax rate in the United Arab Emirates is 9%. This rate will be in effect for financial years beginning on or after June 1, 2023. On the other hand, there will be no corporate tax applied to taxable income that falls below this cap. It’s important to remember that big multinational corporations that come under Pillar Two might have to pay an additional 15% in taxes.

When must a business in Dubai file for corporate tax?

The Federal Tax Authority’s (FTA) website states that taxable individuals have a registration period that extends until the date of their initial tax return submission. For example, a taxable person has 26 months to register if their financial year ends on May 31st. This means they have until February 28th, 2025, to finish the registration process. Similarly, taxable individuals have 33 months to register if the fiscal year ends on December 31st; this window of time extends to September 30th, 2025.

What are the rules for transfer pricing?

The pricing of goods and services exchanged between related firms, including businesses within the same multinational enterprise group, is governed by a set of rules and regulations known as transfer pricing. Its goal is to stop the pricing manipulation brought on by their connections. Transfer pricing regulations significantly affect enterprises in the United Arab Emirates. The UAE Ministry of Finance recently implemented legislation requiring businesses to transact at arm’s length with connected parties. This implies that the costs of goods and services must be comparable to those in deals between unaffiliated parties.

How is corporate tax calculated in Dubai?

Corporate tax in Dubai is calculated at a rate of 9% on the net profit shown in the financial statements of the company. This computation is made following the subtraction of all allowable deductions and the removal of tax-exempt income. The profit reported in the financial statement may also be reduced by the amount of foreign taxes paid. The net profit that remains after all deductions is what is used to calculate taxable income. If the taxable value is more than AED 375,000, corporate tax at the rate of 9% is required.

Conclusion: All taxable people are required to register for Dubai corporate tax and get a corporate tax registration number from the UAE Federal Tax Authority. Non-resident people who receive income from the state but do not have a permanent place of business or other connection to the UAE are not required to register. Because their home country is the primary taxing authority and they will not have a corporate tax burden in the UAE, this exemption is permitted.