Publication of the New Corporate Income Tax Law in the UAE

published on 19. December 2022 | reading time approx. 2 minutes

The time has come, the long-awaited publication of the new corporate income tax law in the United Arab Emirates (UAE) has taken place on 9 December 2022. On 31 January 2022, the UAE Ministry of Finance announced for the first time the introduction of a federal corporate income tax on company profits.

As a result, the so-called "Public Consultation Document" on the upcoming corporate income tax was published on 28 April 2022. This was intended to give companies, entrepreneurs and other interested parties a rough overview of the upcoming regulations. In addition, the provisional nature of these regulations was used to receive suggestions for improvement from the business community.

Prior to the publication of the final legislation, the Ministry of Finance offered future taxpayers and other interested parties the opportunity to participate in a public consultation process and submit their input or suggestions for improvement. These were then reviewed and partially implemented to refine the legislation prior to its official publication.

Who will be taxed on the income?

There are different kinds of taxable persons as well as exempted persons which are relevant. Taxable persons include:

The natural person who conducts business or business activities and the legal person who can be either a taxable resident or a taxable non-resident.
Family foundations and foreign partnerships belong to fiscally transparent persons and are taxable as well as the fiscally transparent partnerships.

Exempted persons:

exempt entities are especially the governmental- and governmental controlled entities
qualifying public benefit entity as well as qualifying investment fund
person engaged in non-extractive and extractive business
private and public pension or social security fund
any other person determined in the Cabinet Decision as well as wholly owned and controlled UAE subsidiaries

Additional Compliance Requirements

The following conditions like maintaining a reasonable substance, meeting transfers pricing requirements, earning qualified income as well as any other conditions specified by the secretary of state need to be met by a person in a free zone to be considered a qualified person.

There is also to consider that a qualified freezone person cannot transfer or offset losses to or from taxable persons nor be a member of as tax group. But the qualified person can make elections to be taxed at 9 per cent.

The election is effective from the commencement of tax period in which election was made.

It is possible that based on decisions made by the Ministry of Finance, qualified free zone person can be required to maintain audit or certified financial statements as well might need to file a disclosure form along with the tax return.

Certainly, the qualified person must file a tax return.