UAE’s New Corporate Tax Regime – Capital Gains Tax

On January 31, 2022, the United Arab Emirates (UAE) Ministry of Finance announced the implementation of a ground-breaking corporate tax regime in the UAE, effective from fiscal year 1 or later^Yingshi June 2023. OECD (Organization for Economic Co-operation and Development) member UAE is introducing a federal corporate tax regime in an effort to align with international norms on the minimum effective tax rate initiated under the OECD Base Erosion and Profit Pillar II Transfer Project.

The UAE adopts the lowest corporate income tax rate of 9% in the Gulf Companies Council, which applies to all businesses and companies carrying out business activities in the seven emirates.

1. Applicability of UAE Federal Corporate Tax




2. Legal entities such as LLC, PSC, PJSC, LLP incorporated in the UAE and any other legal entity carrying out business activities in the UAE.




3. A foreign legal entity that has a permanent establishment in the UAE, has income in the UAE or has a link in the UAE as stipulated by a ministerial decision.




4. The Cabinet decision designates natural persons who conduct business in the UAE.

A legal entity that is registered, established and/or recognized outside the UAE, but is effectively managed and controlled in the UAE.

• Effective date of the federal corporate tax regime




• for 1^Yingshi Fiscal Year Beginning June 1, 2023^holy Runs June 2023 to May 31, 2024. submit 1^Yingshi Tax returns should be completed by the end of 2024.




• For companies whose calendar year begins on the 1st^holy Ends January – 31, 2023^Yingshi From December 2023, the new corporate tax system will be^Yingshi January 2024, due mid-2025.

• Exemption from the corporate tax regime




• Businesses engaged in the extraction of natural resources are exempt from the corporate tax regime, but they will continue to be subject to tax laws established by their respective emirates.




• Income earned by individuals from their activities, provided their activities do not require a business license and employment income.




• Income generated by foreign investors through dividends, capital gains, royalties on other investments.




• Individuals invest in real estate in their personal capacity.




• Interest from bank deposits or savings.




• Profit from group restructuring and intra-group transactions if the required conditions are met.




• Dividends earned by UAE companies from their holdings of shares or other securities.




• Government Entities and Government-Controlled Entities




• Public or private pension and social security funds




• Qualified public welfare entities and investment funds stipulated by relevant laws.

• Applicable rate




• The tax rate is 0% on all annual business profits below the 375.000 AED threshold.




• All businesses with an annual operating profit exceeding AED 375.000 are subject to a 9% tax rate.




• Large multinational companies with profits exceeding EUR 750 million are subject to a 15% tax under pillar 2 of the OECD Base Erosion and Profit Shifting CBEPS project.

about in FTA, corporate tax incentives will continue to apply and such businesses are subject to 0% tax if they do not carry out any business in the UAE mainland and comply with all regulatory requirements, including the obligation to register and file corporate tax returns. Conducting business in the UAE mainland and free trade zones should be defined according to the operating model.

transfer pricing rules Applicable to transactions between related parties and related parties that meet the criteria of the OECD transfer pricing rules.

Eurofast’s experts will be happy to provide you with any further explanations regarding the UAE corporate taxation system and guide you through all the process of detailing reporting, registration, administration or filing related applications.

The content of this article is intended to provide general guidance on the topic. Expert advice should be sought depending on your specific situation.