Corporate Tax Services

Corporate Tax will be applicable for financial years starting on or after 1 June 2023.

The highlights of Corporate Tax (CT) Federal Decree-Law No. (47) of 2022 issued on 9^th December 2022 are as follows:

• CT is applicable on business income of individual as well as juridical persons.
• Applicable also for income from outside the state.
• All taxable person should register for Corporate Tax
• Rate of Corporate Tax shall 9% on Taxable Income exceeding 375,000 and 9% on Non Qualifying Income for a Qualifying Free Zone Person.
• Tax Return within nine months from the end of the financial year.
• The Authority may request a Taxable Person to submit the financial statements used to determine the Taxable
• Applicable also to Non-residents if conditions like permanent establishment, nexus in the state etc are met.
• Not applicable for exempt persons specified under Article 4.
• Unless approved, each partner in an Unincorporated Partnership or member in Family foundation is individually taxable.

 

• The Taxable Income shall be the Accounting Income adjusted for the following:
  1. Any unrealised gain or loss under clause 20(3),
  2. Exempt Income under chapter 7.
  3. Reliefs under chapter 8.
  4. Deductions under chapter 9.
  5. Transactions with Related Parties and Connected Persons under chapter 10.
  6. Tax Loss relief under chapter 11.
  7. Any incentives or special reliefs or other adjustments specified the Cabinet.
• Income exempt includes:
• Dividends and other profit distributions received from a resident juridical person.
• Dividends and other profit distributions received from a Participating Interest in a foreign juridical
• Any other income from a Participating Interest as specified in Article 23
• No gain or loss in relation to transfer of assets or liabilities within a Qualifying Group will not be taken into account in determining the Taxable Income.
• No gain or loss in relation to Business Restructuring will not be taken into account in determining the Taxable Income.
• Allowability of Expenditure:
• Expenditure incurred exclusively for Business shall be deductible unless in capital nature/ incurred in deriving Exempt If incurred for more than one purpose, proportionately allowable.
• Net Interest Expenditure deductible shall be 30% accounting Earnings Before the deduction of Interest, Tax, Depreciation and Amortisation (EBITDA).
• Interest on loan from related party is deductible only if it is demonstrated that loan was not taken to gain tax advantage.
• Entertainment Expenditure shall be allowed to deduct 50%
• Non-deductible Expenditure includes:
• Donations, grants or gifts made other than to a Qualifying Public Benefit
• Fines and penalties, other than amounts awarded as compensation for damages or breach of
• Bribes or other illicit
• Dividends, profit distributions or benefits of a similar nature paid to an owner of the Taxable
• Amounts withdrawn by a partner in an Unincorporated
• Corporate Tax
• Recoverable portion of Input Value Added Tax.
• Tax on income imposed on the Taxable Person outside the
• Such other expenditure as specified by the
• Transactions and arrangements between Related Parties must meet the arm’s length standard failing which the Authority shall adjust the Taxable Income.
• The Authority may require to submit the Taxable Person’s transactions and arrangements with its Related Parties and Connected Persons in the prescribed form.
• The opening balance sheet shall be prepared considering the arm’s length principle.
• Tax Loss can be offset against the subsequent Taxable Income upto 75% of taxable income subject to conditions.
• Tax Loss may be offset against the Taxable Income of another Taxable Person subject to conditions where ownership interest is 75% or more.
• Tax groups can be formed subject to conditions and will be treated as a single taxable person.
• Rate of Withholding Tax for the time being is Zero.
• Corporate Tax due can be reduced by Foreign Tax
• Should maintain all records and documents for 7 years.

Corplans Global, with its dedicated team updated on Corporate Tax, will analyse the impact of the Corporate Tax on your business and will advise how effectively you can save the tax burden.