UAE Sets Zero Corporate Tax Threshold At US$100,000

The UAE has set the ‘Applicable Taxable Income’ threshold for Corporate Tax. A zero per cent rate will apply to taxable income that does not exceed Dh375,000 (US$102,000) during the same tax period regardless of the number of businesses or business activities the taxable person is engaged in during that period.

A 9 per cent rate will then apply to taxable income exceeding Dh375,000 during the relevant tax period. UAE businesses will become subject to Corporate Tax from the beginning of the first financial year, starting on or after June 1, 2023. The rate has been set at 9 per cent and is applicable to taxable income above Dh375,000, in alignment with the Ministries previous announcement.

The Cabinet Decision on Applicable Taxable Income Threshold for Corporate Tax confirms the tax rates that were previously announced. Their statement says “The rates and the threshold have been carefully decided and reflect the fairness and competitiveness of the UAE’s Corporate Tax regime.

A zero per cent threshold for taxable profits up to and including Dh375,000 is a significant indication of our ongoing support for startups and small businesses in recognition of their vital contribution to the UAE’s economic growth.”

“In addition, the 9 per cent rate for taxable income above that threshold is highly competitive compared to other jurisdictions and provides taxpayers with certainty, thus cementing the UAE as a leading jurisdiction for business and investment.”

Defining Business Activity in the UAE

The UAE Cabinet decision defines a ‘business’ as ‘an activity conducted regularly, on an ongoing and independent basis by any person and in any location, such as industrial, commercial, agricultural, vocational, professional, service or excavation activities or any other activity related to the use of tangible or intangible properties’.

It defines a ‘business activity’ as ‘any transaction or activity, or series of transactions or series of activities conducted by a any natural or juridical person in the course of its business’.

For assistance with establishing a business in Dubai and the UAE please contact Dezan Shira & Associates local office at dubai@dezshira.com

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