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Everything you need to about the new law of Corporate Tax in UAE

Posted by Abrar Hussain on July 22, 2023
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The introduction of Corporate tax is meant to help and promote the strategic measures and facilitate the development and transformation of UAE. UAE has always strived to be the best with the international standards and extensive network. This enables the country to work together with a sense of togetherness. As per the website of Ministry of Finance, the Corporate Tax Law provides the legislative basis for the introduction and implementation of a Federal Corporate Tax in the UAE and is effective for financial years starting on or after 1 June 2023.

The real estate market in Dubai is one of the most dynamic and booming market in the world. Over the past years, the rapid growth and transformation of the city has led to rich and large projects of residential and commercial properties. The geographical location of UAE, has taken an advantageous toll too, for people to migrate; do business and reside from Europe and Asian.

Taxes are imposed on to build and maintain pubic infrastructure and improve the countryโ€™s development. Allocation of tax revenues may vary across different regions of UAE, depending on their specific needs and priorities and socio-economic conditions.

The UAEโ€™s Ministry of Finance on May has issued a clarification under which foreign companies and other non-residential juridical person will be subject to 9% corporate tax on income earned from real estate and other immovable property in the UAE. However, the government has informed both the local and foreign companies to register into the system within one year to avoid penalties.

WHO IS EXEMPTED?

The Ministry has even mentioned that real estate investment income that are earned in the form of immovable property owned by foreign or UAE resident individual, either directly or through a trust foundation would general not be subject to corporate tax provided it is not licensed under an entity. Along with it, it is even issued that real estate investment trusts and other qualifying investment funds will be exempted from corporate.

The law incorporates international taxation principles to ensure neutrality between domestic and foreign companies earning income from those property.

The following sectors of income do not subject to Corporate Tax:

  • Those businesses that are involved in the obtaining and extraction of natural resources are not subject to Corporate tax as these entities will be subjected to the current Emirate level corporate taxation.
  • Entities that hold dividends and capital gains earned by any UAE business from its qualifying shareholding are exempted from the announced Corporate Tax.
  • An individual attaining a salary and other employment income, be it any private or public sector are not included in this.
  • An income of an investor from foreign nationals from dividends, capital gains, interest, royalties and other investment returns do not come under the category
  • Investment in real estate by individuals in their personal capacity

Bibliography

https://u.ae/en/information-and-services/finance-and-investment/taxation/corporate-tax

FREQUENTLY ASKED QUESTIONS (FAQS)

What is the purpose of introducing Corporate Tax in the UAE?

The introduction of Corporate Tax aims to promote strategic measures, facilitate development, and align the UAE with international standards. The law is effective for financial years starting on or after June 1, 2023.

How does the Corporate Tax Law contribute to the development and transformation of the UAE?

The Corporate Tax Law provides a legislative basis to support the development and transformation of the UAE by implementing a Federal Corporate Tax. It aligns with the country’s commitment to international standards.

When did the Corporate Tax Law come into effect?

The law is effective for financial years starting on or after June 1, 2023, as per the Ministry of Finance.

How has the real estate market in Dubai been affected by the introduction of Corporate Tax?

 The real estate market in Dubai, known for its dynamism and growth, has been impacted by the introduction of Corporate Tax, particularly concerning income earned from real estate and immovable property.

What corporate tax rate applies to foreign companies and non-residential juridical persons in the UAE?

Foreign companies and non-residential juridical persons are subject to a 9% corporate tax on income earned from real estate and other immovable property in the UAE.

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