02 Feb 2023
The Ministry of Finance has recently published a Cabinet Decision on the Taxable Income Threshold for Corporations.
This decision followed the enactment of the Federal Decree-Law on the Taxation of Corporations and Businesses (the "Corporate Tax Law") in December 2022.
As of 1st of June 2023, businesses will be subject to UAE Corporate Tax from the beginning of their first financial year.
As announced earlier by the Ministry, the corporate tax rate has been set at 9 percent for taxable income exceeding AED375,000. This ensures that the UAE's corporate tax regime remains among the most competitive in the world and strengthens the country's position as a leading global business and financial center.
Regardless of the number of businesses or activities the taxable person is involved in during that tax period, a zero percent rate will apply to taxable income below AED375,000 during the same tax period.
The taxable income above AED375,000 for the relevant tax period will be subject to a 9 percent tax rate.
According to Younis Haji Al Khoori, Undersecretary of the Ministry of Finance, "The Cabinet Decision on the Taxable Income Threshold for Corporate Tax confirms the previously announced tax rates."
" In recognition of small businesses and start-ups' crucial role in Emirates' economic growth, the decision has lowered the taxable profit threshold to zero percent for profits up to and including AED375,000.
Additionally, the UAE offers a highly competitive tax rate for taxable income above that threshold of 9 percent, ensuring certainty to taxpayers, thus cementing its status as a premier investment and business jurisdiction."
According to the Cabinet Decision, a “Business” refers to an activity that is carried out regularly, independently, and on an ongoing basis by anyone at any location, whether it is industrial, commercial, agricultural, vocational, professional, service, excavation, or any other activity involving tangible or intangible resources. In this regard, "Business activities" include all transactions and activities that a natural or juridical person conducts as part of conducting its business."