1 of June 2023, the UAE’s Federal Tax Authority (FTA) will formally begin to charge 9% corporation tax – it will be the first time companies in the country will be asked to pay taxes. To this end, the FTA has announced that the new legislation will apply to businesses that earn over 375,000 AED per year or hold a certain amount in assets.
Entrepreneurs within these parameters will also be taxed as a business, so moving companies assets to your personal accounts may not really be a helpful solution. As for employees in the UAE with a single stream of income, there’s no need to worry as salaries are still taxed at 0%. So, the new tax regime has no impact on your net pay.
To ensure adherence, the UAE plans to punish tax evaders with huge fines, and all businesses are required to register and submit their account information. Since the law is due to be implemented in June, it’s essential to start working on it now – don’t procrastinate.
The free zones, as well as onshore entities, are also subject to the 9% corporation tax, and here’s a breakdown to provide more clarity:
- Free zone companies that conduct business with onshore entities have to pay the 9% tax
- Free zone companies that conduct all their business overseas will remain on the 0% tax rate. However, they need to submit their account information to the FTA and explain why they’re not paying taxes
In summary, companies and entrepreneurs in the UAE now have to submit account information to the tax regulatory body from June 1, 2023. Subsequently, the auditors may look at their 2022 records and compare it to the 2023/2024 account statements to find irregularities. If there’s a big difference that cannot be justified, business owners may be fined – or worse.
The UAE is working hard to remain one of the fastest-growing business hubs in the world and a leading financial destination for businesses. And while it charges a corporation tax now, it’s still lower than what other nations charge, and the process is more transparent and straightforward. It all begins in 13 days, take note!