In simple terms, on January 31, 2022, the United Arab Emirates (UAE) changed its tax rules. The Ministry of Finance said they will start a new kind of tax for companies, called corporate tax, from June 1, 2023. This means companies in the UAE, except for Bahrain, will have to pay a small amount of their income as tax. The special thing is that the UAE set the tax rate at 9%, which is the lowest among the countries in the region. So, starting from June 2023, companies in the UAE will need to keep this new tax in mind when they calculate their finances.
Corporate tax registration in the UAE is a fee imposed on a company’s profits, set at a rate of 9%. Given the UAE’s status as a major business and commercial center, it’s crucial for businesses to grasp the local corporate tax landscape.
The government imposes this tax on businesses, with the amount contingent on factors like company size, profits, and type. The importance of corporate taxation stems from several reasons.
Firstly, it serves as a vital revenue source for the government. This income aids in covering the expenses of essential public services such as education, healthcare, and infrastructure.
Secondly, corporate tax registration promotes fairness among businesses. By ensuring that all businesses contribute their equitable share of tax, it creates a level playing field. This prevents larger businesses from gaining an unfair advantage over smaller counterparts.
Calculating Corporate Tax in the UAE: A Step-by-Step Guide
The latest news says that companies will start paying corporate tax from the financial year starting on or after 1 June 2023. If a business has its financial year starting on 1 January 2023 and ending on 31 December 2023, they’ll begin paying corporate tax from 1 January 2024.