With the impending implementation of Corporate Tax (CT) in the UAE on June 1, 2023, stakeholders across the board are analyzing its potential impacts on businesses, individuals, the government, and the overall economy. Here’s a breakdown of how CT will affect key stakeholders:

Companies Covered Under Corporate Tax in UAE:

• UAE native companies or domestic companies.
• Foreign companies with a permanent establishment (PE) in the UAE.
• Non-resident companies conducting business activities or deriving profits from sources in the UAE.

Residential Status of Companies:

• Resident companies include domestic companies and foreign companies effectively managed and controlled in the UAE, subject to Corporate Tax on global income with certain exemptions.
• Non-residents are entities not classified as residents, taxed only on UAE-sourced income or revenue related to a permanent establishment.

Progressive UAE Corporate Tax Rate:

• AED 375,000 annual taxable income: 0% tax rate.
• Taxable income exceeding AED 375,000 per year: 9% tax rate.

Multinational corporations with consolidated global revenues exceeding EUR 750 million: Subject to a different tax rate.

Determining Allowable Expenses:

Generally, all revenue expenditures for business purposes are deductible. However, specific items are not recognized as deductions, such as entertainment costs, administrative penalties, VAT recovery, etc.

Impact of Corporate Tax in UAE:

• Implementation costs and increased demand for tax specialists.
• Shareholders may raise prices to maintain profits, impacting consumer purchasing power.
• Reduced demand for goods and services could affect business production and sales.
• Corporate Tax may influence Foreign Direct Investment decisions and profit repatriation.
• Higher prices may prompt employees to seek wage increases, impacting overall consumer expenses.

While CT may initially affect corporate savings and FDI, it aims to boost investor confidence and contribute to long-term economic growth.

In summary, CT aims to align the UAE with global tax standards, fostering a stable environment for businesses to thrive and contribute to economic growth. For more insights on UAE corporate tax, contact our expert advisors at Elysian. We’ll guide you through the implementation details and ensure compliance with regulations.