Law of Taxation on Companies and Businesses in UAE
Federal Law of Taxation on Companies and Businesses was issued via Decree No. (47) of 2022 on 3 Oct 2022, entering into effect (15) fifteen days from the date of its publishing in the Official Gazette and shall be applied on the tax periods starting on/after 1 June 2023.
Article No. (68) of this Law states that any provision in contrast and/or in conflict with the provisions of this law is deemed void, and if the provisions of this Law are in conflict with an approved international convention in the country, the provisions of the international convention shall be applied.
A (9%) nine per cent of taxes shall be applied on person whose income is exceeding (375,000 AED) Three Hundred Seventy-five thousand AED as follows:
1) Resident companies and juristic persons that have been established and/or are being managed on the territory of UAE.
2) Natural persons (individuals) that are carrying out businesses and/or commercial activities on the territory of UAE.
3) Non-resident juristic persons, which are having a resident entity on the territory of UAE.
4) Juristic persons, which have been established in the free zones’ territory shall comply with the requirements stated in the Companies Taxation Law to be treated under this tax (9%).
5) Although, a juristic person established in the free zone territory may -under certain conditions- be considered an eligible person to be subject to zero percent of companies’ tax.
6) Persons (natural or juristic) who have a non-resident entity or are earning arising income from the territory -not related to their resident entity- may be subject to the initial deducted tax with a percentage of 0% (zero percent).
The initial deducted tax is considered one of the forms of company taxes that shall be collected from the start by the committed person on behalf of the income receiver.
The following shall be exempted from the Law of Taxation on Companies and Businesses (LTCB):
1) Governmental entities and their affiliates automatically specified by the Cabinet’s Decree without any conditions.
2) Extractive businesses and non-extractive natural resources businesses –with a notice submitted to the Ministry of Finance with certain conditions that shall be fulfilled.
3) Eligible Public Benefit Entities – when they fulfil certain conditions specified by Article (9) of LTCB-.
4) Pension funds or public/private social securities, eligible investment funds, subsidiaries owned by the Government or by one of its affiliates.
5) Persons -juristic or natural- whose income does not exceed 375,000 AED or juristic persons fully owned by an eligible natural person under this Law (operating its activities, acquiring its assets, investing for its own personal interest, or exclusively operating backstopping activities for the interest of the eligible person.
The below-mentioned are not subject to tax under the LTCB:
1) Salary of individuals or any other income acquired from their jobs, whether received from governmental or private sectors.
2) Interest and other types of income from bank deposits or savings schemes earned by individuals for the state’s corporate tax.
3) Personal investment in real estate for the account and in the name of the person itself.
4)Foreigners’ income arising from dividends, capital gains, profits, concession rights, and other investment returns.
5) Personally gain dividends, capital gains, and other incomes arising from owning stocks or any kind of financial papers.Shura Law firm offers its services in UAE with professionalism and experience, and we’re happy to have you communicate with us in 10 minutes free consultation via Zoom – book your appointment now.
