Subcategory One

Do I need to Pay Foreign Tax and Double Taxation?

Foreign Tax 

Under the upcoming UAE Corporation Tax regime, foreign companies will be subject to the corporate tax rate of 9% on annual taxable income exceeding AED 375,000. 

However, this is usually only applicable to businesses which conduct trade or do a business in the UAE on a regular basis. Foreign investors on the other hand would have a separate treatment. Corporation tax would not normally by levied on dividends, capital gains, interest and royalities.

Foreign Tax Circumstances 

To qualify for the 9% annual tax rate a foreign company operating in UAE has:

  • Their Permanent Establishment (PE); or 
  • Their Place of Effective Management; or 
  • Their source of income.

Double Taxation

Double Taxation can occur when two countries tax the same income. It can also occur on a corporate and personal level, as can be the case with stock dividends.

International Double Taxation 

Income may be taxed in the country where it is earned, and then taxed again when it is received in a business’ home country. 

Countries around the world have signed hundreds of treaties for the avoidance of double taxation, often based on models provided by OECD. These treaties are made by nations agreeing to limit taxation of international business in an effort to strengthen trade, and to avoid double taxation. 

Foreign Corporation Tax paid on UAE taxable income is expected to me allowed as a tax credit or deduction against the UAE CT liability subject to certain requirements.

Key contact

Rayhan Aleem
Managing Partner of Alpha Pro Partners

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Corporation Tax Introduction

All businesses and individuals conducting business activities under a commercial license in the UAE will be subject to Corporation Tax.

Do I need to Comply with Transfer Pricing?

Transfer pricing refers to the prices of goods and services that are exchanged between companies under common control.

What is Group relief?

Group relief is a relief from Corporation Tax. Businesses are able to create tax groups under the UAE corporate tax framework, which will go into force in June 2023.

Key Corporate Tax Considerations for Small Business

On the 1st of June 2023, the corporate tax rate will be 9% of the net profit made by businesses in the AUE. In order to support small businesses and start-ups, the corporate tax rate will be ‘0’ % if the net profit is up to 3,75,000 AED.

Small Business Compliance Checklist

The new UAE Corporation Tax regime will require businesses to have comprehensive accounting and bookkeeping in place.

Go back to Corporation Tax Home

Corporate Tax (CT) is a direct tax levied on the net income or profit of corporations and other businesses.

What we offer

Key Highlights on UAE Corporation Tax  

  • UAE Corporation tax rate one of the lowest within the GCC region and along major economies
  • Tax applicable on profits above AED 375,000 and not below that
  • Standard Corporate Tax Rate is 9%
  • CT effective from 1 July 2023 from financial year 2023 ending on 30 June 2024
  • The financial year for businesses starting 1 January 2023 and ending 31 December 2023 will become subject to the tax beginning from 1 January 2024
  • Tax incentives offered to freezone businesses complying with all regulatory requirements will remain
  • Capital gains and dividends received by the companies in UAE from their qualifying shareholdings are also exempt from paying CT.

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