Services

The Federal Decree-Law No. (47) of 2022 on the Taxation of Corporations and Businesses (hereinafter referred to as the “Corporate Tax Law”) was issued by the United Arab Emirates (“UAE”), on 09 December 2022.

The Corporate Tax Law provides the legislative basis for the introduction and implementation of a Federal Corporate Tax (“Corporate Tax”) in the UAE and is effective for financial years starting on or after 1 June 2023.

The introduction of Corporate Tax is intended to help the UAE achieve its strategic objectives and accelerate its development and transformation. The certainty of a competitive Corporate Tax regime that adheres to international standards, together with the UAE’s extensive network of double tax treaties, will cement the UAE’s position as a leading jurisdiction for business and investment.

Given the position of the UAE as an international business hub and global financial centre, the UAE Corporate Tax regime builds from best practices globally and incorporates principles that are internationally known and accepted. This ensures that the UAE Corporate Tax regime will be readily understood and is clear in its implications

Corporate Tax Consultancy Services in the UAE

What is the Corporate Tax in the UAE?

Corporate Tax is a form of direct tax levied on the net income of corporations and other businesses.

Corporate Tax is sometimes also referred to as “Corporate Income Tax” or “Business Profits Tax” in other jurisdictions.

Corporate Tax will be levied at a headline rate of 9% on Taxable Income exceeding AED 375,000. Taxable Income below this threshold will be subject to a 0% rate of Corporate Tax.

The Federal Tax Authority shall be responsible for the administration, collection and enforcement of this Law and its related provisions.

The Corporate Tax advisors at Liberty Tax will help you deal with Corporate Tax law and provide advice on Corporate Tax compliance and avoid the legal consequences of breaking the law.

Corporate Tax Registration

Unlike the minimum voluntary and mandatory registration in VAT, there is no minimum registration in corporate and business tax, as companies, as legal persons, are obliged to register in corporate tax, and those companies are Emirati nationals (i.e. an establishment and registered in the UAE Companies Register) or foreign ones. But it is administered by a physical control centre in the U.A.E. state, whether the mainland or any of its free zones.

According to Federal Decree-Law No. (47) of 2022, the following entities will be subject to the Corporate Tax Law:

Broadly, Corporate Tax applies to the following “Taxable Persons”:

• UAE companies and other juridical persons that are incorporated or effectively managed and controlled in the UAE;
• Natural persons (individuals) who conduct a Business or Business Activity in the UAE as specified in a Cabinet Decision to be issued in due course; and
• Non-resident juridical persons (foreign legal entities) that have a Permanent Establishment in the UAE.

Juridical persons established in a UAE Free Zone are also within the scope of Corporate Tax as “Taxable Persons” and will need to comply with the requirements set out in the Corporate Tax Law. However, a Free Zone Person that meets the conditions to be considered a Qualifying Free Zone Person can benefit from a Corporate Tax rate of 0% on their Qualifying Income.

Non-resident persons that do not have a Permanent Establishment in the UAE or that earn UAE sourced income that is not related to their Permanent Establishment may be subject to Withholding Tax (at the rate of 0%). Withholding tax is a form of Corporate Tax collected at source by the payer on behalf of the recipient of the income. Withholding taxes exist in many tax systems and typically apply to the cross-border payment of dividends, interest, royalties and other types of income.

Natural Persons who are obliged to register in the Corporate Tax system

Pursuant to the Council of Ministers Resolution No. 49 of 2023 regarding the determination of the categories of business or business activities practiced by a resident or non-resident natural person that are subject to corporate tax, a natural person residing and not residing in the United Arabic UAE shall be subject to corporate tax, whenever his revenues from such business or business activities exceed an amount of AED 1,000,000 million during one calendar year, and does not include in the calculation of such revenues the wages paid to the workers, nor the income. Private or real estate investment.

Whereas paragraph 3 of Article 2 of the said resolution stipulates that it is not obligatory to register in corporate tax for a natural person whose realized revenues do not exceed an amount of (1,000,000) million dirhams.

In addition to the entities that are not obliged to register in the corporate and business tax system in the UAE, we add the persons who are treated as a person exempt from corporate tax, and they are:

Certain types of businesses or organisations are exempt from Corporate Tax given their importance and contribution to the social fabric and economy of the UAE. These are known as Exempt Persons and include:

    Automatically except:

• Government entities
• Government Controlled Entities that are specified in a Cabinet Decision

Exempt if notified to the Ministry of Finance (and subject to meeting certain conditions)

• Extractive Businesses
• Non-Extractive Natural Resource Businesses

• We here at Liberty Tax Consultancy provide all clients with tax registration services with our experience and leadership in this field, our specialized consultants will provide you with all the answers to doubts and questions that surround you regarding corporate tax, the mechanism used for tax registration and other procedures related to ensuring the best possible tax compliance.

Tax Groups in Corporate Tax Law

Tax Groups

Groups formed by two or more Taxable Persons subject to the fulfilment of certain conditions for their treatment as one Taxable Person for corporate tax purposes, where the application is submitted to the Federal Tax Authority after fulfilling all the required conditions, and the right to submit such an application is limited only to legal persons residing in the UAE.

Conditions to be met for the formation of tax groups

Article 40 of the Corporate Tax Law stipulates the conditions related to the formation of tax groups, where the resident who applies for the formation of the tax group in the parent company is referred to as follows:

 Resident persons must be legal persons.

• The parent company is directly owned by at least 95% of the capital of the subsidiary company or indirectly through one or more subsidiaries.
• The parent company directly has at least 95% of the voting rights in the subsidiary or indirectly through one or more subsidiaries.
• .The parent company shall have the right directly to the profits and net assets of the subsidiary by at least 95% or indirectly through one or more subsidiaries.
• Neither the parent company nor the subsidiary is a tax-exempt person.
• Neither the parent nor the subsidiary is an existing qualified person in the free zone.
• The financial year should be the same for the parent company and the subsidiary.
• The accounting standards used in the preparation of the financial statements should be the same as for the parent company and the subsidiary.

Exclusions of tax groups related to the government entity

The law stipulates that it is not possible to form a tax group in the case where the parent company or subsidiary is a person exempt from corporate tax, but the legislator excluded government agencies from this provision by allowing these entities under the second paragraph of Article 40 of the Corporate Tax Law to form tax groups in which government entities directly or indirectly own at least 95% of the ownership shares.

Obligations of the parent company in the tax group

• The parent company is required to comply with all obligations related to tax registration, tax return filing and tax payment.
• The parent company and the companies or subsidiary companies shall be jointly and severally liable for the corporate tax payable by the tax group for the tax periods in which they are members of this group
• The joint and several liability referred to above may be limited to one or more members of the tax group, based on the approval of the Authority.

Conditions related to the termination of the existence of the tax group

This shall be done in any of the following two cases:

• This must be in accordance with a request to cancel a tax group submitted by the parent company and approved by the Authority.
• In the event that the parent company will no longer meet the conditions stipulated in the law regarding the formation of the tax group.

Cases related to the replacement of the parent company in the tax group

This shall be done by virtue of a request submitted by the parent company of the Authority to replace it with another company without the cessation of the tax group, in any of the following two cases:

• If the new parent company fulfils all the conditions stipulated in the law regarding the formation of a tax group.
• In the event that the previous parent company has ceased to exist and the new parent company or subsidiary company is its legal successor in all matters related to its rights and duties.

The Authority may, in certain cases, at its discretion, dissolve the tax group or change its parent company, according to the information and data it has, provided that the Authority notifies the tax group of such action.

Expiry date and formation of tax group

All dates related to the expiry and departure of a subsidiary company and the formation of the tax group are related to the tax period specified in the application or any other tax period determined by the Authority, in the case of for example related to the departure of a subsidiary of the tax group, it is considered to have left as of the beginning of the tax period specified in the application submitted by the Authority or any other tax period determined by the Authority.

Tax losses in the event of the end of the tax group

All unused tax losses in the event of the end of the tax group are allocated as follows:

• All tax losses remain with the parent company if it continues to be taxable.
• In the event that the parent company is no longer taxable, such tax losses may not be deducted from the income of the subsidiary that it realized after the end of the tax package.

How taxable income is calculated for the tax group

This shall be in accordance with consolidated financial statements prepared by the parent company, so that these statements cover each subsidiary that is a member of the group for the relevant tax period, and all transactions between the parent company and any subsidiary and transactions between members of the group are excluded for the purposes of calculating taxable income for the tax group.

Liberty Tax Consultancy LLC, we have consultants specialized in everything related to Corporate Tax

Cancellation of Corporate Tax Registration

This is done by virtue of an application submitted by the person who has a tax registration number, where the application is submitted to the Federal Tax Authority, in the event that the person stops practicing his activities and business as a result of liquidation, dissolution or any other reasons that may lead to this.

One of the requirements related to the cancellation of tax registration, this registration may not be cancelled until after the payment of the due tax and all administrative fines incurred, in addition to the submission of tax returns due to be submitted.

Tax Deregistration Services from Liberty Tax 

The presence of the company in a state of liquidation or cessation of its business and activities does not mean the automatic cancellation of its tax registration, as there are procedures that must be identified and data that must be reviewed to ensure the integrity of the request related to the cancellation of tax registration.

We at Liberty Tax, with its leadership and experience in this field, provide you with all services related to tax deregistration and ensure the integrity of the data attached to the application, where our specialized consultants carefully review all data and information to take note of all aspects related to tax deregistration.

Submission of Corporate Tax Returns

Taxable persons shall submit their tax returns to the Federal Tax Authority in accordance with the forms and procedures specified by the Federal Tax Authority within a period not exceeding (9) months from the date of the end of the relevant tax period or any other date determined by the Authority.

Companies whose fiscal year is from June 1 to May 31, the first tax period for them is extended from June 1, 2023 until May 31, 2023, while the second tax period is during the same period of the year 2024, and the deadline for submitting a tax return for the first tax period is February 28, 2025

Companies whose fiscal year is from January 1 to December 31, the first tax period for them is extended from January 1 to December 31, 2024, while the second tax period is during the same period of the year 2025, and the deadline for submitting a tax return for the first tax period is September 30, 2025

Tax Filing Services from Liberty Tax

As with tax registration, submitting the tax return, including the data and information it contains, is the cornerstone of your tax obligation set featured image, as the data contained in this return is an argument against its owner and a realistic translation of his work and activities.

We at Liberty Tax, with our experience and leadership in the field of tax legislation, provide you with all services related to submitting tax returns, where our specialized consultants review in detail and accuracy all the data and information necessary to submit corporate tax returns.

Advantages of Liberty Tax 

It is not just about providing services related to tax registration and filing tax returns, but more than that of advice and assistance provided by our specialized consultants to all clients, it is not just a passing consultation, but a bridge of trust that guarantees all customers safe access and ideal tax compliance

We are Liberty Tax, one of the most important tax offices in the U.A.E. country and with great experience in this field, we have provided and will always provide a helping hand to all clients with the problems they may encounter with regard to corporate tax and other types of taxes

Liberty Tax, we have consultants specialized in everything related to corporate tax

Transfer Pricing Rules for Businesses in the UAE

Under the Corporate Tax law in UAE, the primary objective of transfer pricing regulations is to guarantee that transactions involving Related Parties adhere to the arm’s length principle, mirroring transactions conducted between independent entities. This ensures that taxable income manipulation is prevented. The corporate tax law of the UAE necessitates that taxable entities determine transactions with Related Parties and Connected Persons by specifying their market value. Therefore, it is recommended that taxable entities seek expert guidance from Tax Consultants in UAE to seamlessly and efficiently implement transfer pricing rules and maintain compliance.

Do transfer pricing rules apply to both domestic and cross-border transactions?

Transfer pricing rules are applicable to businesses in the UAE engaged in transactions with Related Parties and Connected Persons. This applies irrespective of whether these Related Parties or Connected Persons are situated within the UAE mainland, a Free Zone, or in a foreign jurisdiction.

Who are Considered as Related Parties?

In essence, Related Parties refer to an individual’s relatives and also companies in which the individual, alone or alongside their Related Parties, holds a substantial ownership interest, typically 50% or more of the company’s shares. Similarly, for a company, Related Parties encompass other companies in which the company, either alone or in conjunction with their Related Parties, holds a controlling ownership interest—typically 50% or more of the shares—or those under predominant ownership exceeding 50%.

Who are Defined as Connected Persons?

Connected Persons are distinct from Related Parties. Thus, an individual will be deemed connected to a business subject to UAE Corporate Tax if they fulfil any of the following criteria:

• They are the owners of the business.
• They hold a position as a director or officer within the business.
• They are a Related Party of either of the above.
• What methods are available to determine the arm’s length value?

Taxable entities are obligated to employ one or more of the following methodologies to ascertain arm’s length values for transfer pricing purposes:

• Comparable Uncontrolled Price Method
• Resale Price Method
• Cost-Plus Method
• Transactional Net Margin Method
• Transactional Profit Split Method
• Obligation to maintain documentation for transfer pricing purposes

In the context of corporate tax, businesses in the UAE are required to uphold documentation concerning transactions with Related Parties and Connected Persons. Specific businesses are also mandated to submit this information along with their tax returns.

Must taxable entities ensure arm’s length treatment for intra-group loan arrangements?

Transfer pricing rules extend to all transactions involving Related Parties and Connected Persons. Therefore, loans received from or provided to a Related Party or Connected Person must adhere to the arm’s length principle, encompassing factors like interest rates and duration.

Are transfer pricing rules applicable to transactions within a Tax Group?

Transactions among members of a Tax Group are consolidated in the Group’s financial statements, hence they are exempted from adhering to transfer pricing principles. However, an exception arises when a Tax Group member necessitates calculating and including its standalone Taxable Income for utilizing Tax Losses acquired prior to joining the Tax Group or upon exiting it.

Engage the Expertise of UAE Tax Consultants

To effectively ensure that transactions with Related Parties adhere to the arm’s length principle, it is advisable for taxable entities to enlist the services of UAE Tax Consultants. This ensures effective implementation of Transfer Pricing standards, as noncompliance could lead to substantial fines. Reach out to us for assistance, and we will be pleased to guide you.