Understanding the New Tax Landscape
The implementation of Federal Corporate Tax (CT) effective June 1, 2023, represents the most significant fiscal reform in the UAE’s recent history. While aligning with global tax transparency standards, the UAE government has carefully designed the regime to maintain the country’s competitive business environment. At Lexoro Solutions, we help executive teams navigate this transition strategically, transforming compliance from an obligation into a competitive advantage.
Why Corporate Tax Matters for Your Business
The UAE Corporate Tax applies to net profits and operates on a self-assessment basis, placing the responsibility on businesses to accurately calculate, report, and pay their tax liabilities. Understanding the nuances of this regime is critical not just for compliance, but for strategic financial planning and maintaining profitability.
Comprehensive Tax Framework Overview
Effective Date
Applicable for financial years starting on or after June 1, 2023. Businesses with different financial year-ends must carefully determine their first taxable period.
Tax Rates Structure
0% on taxable income up to AED 375,000
9% on taxable income exceeding AED 375,000
Different rates may apply to large multinational corporations under Pillar Two.
Free Zone Benefits
Qualifying Free Zone Persons can benefit from 0% CT on qualifying income, subject to maintaining adequate substance and meeting specific conditions.
Critical Compliance Requirements
Tax Registration
All businesses must register with the Federal Tax Authority and obtain a Corporate Tax Registration Number. The registration timeline varies based on your business license issuance date.
Financial Reporting
Maintain financial statements according to internationally accepted accounting standards. The transition from accounting profit to taxable income requires careful analysis of adjustments and disallowances.
Return Filing
File annual Corporate Tax returns within 9 months from the end of your relevant financial period. Late filing attracts significant penalties and interest charges.
Strategic Tax Planning Considerations
Beyond basic compliance, sophisticated tax planning can significantly impact your bottom line. Key areas for strategic focus include:
- → Transfer Pricing Documentation: Related party transactions require robust documentation and arm’s length principles
- → Tax Group Formation: Explore opportunities to form tax groups for consolidated reporting
- → Capital Allowances: Optimize claims for business assets and capital expenditures
- → Loss Utilization: Strategic planning for tax loss carry-forwards and utilization
Strategic Corporate Tax Advisory
Our team of seasoned tax professionals provides end-to-end Corporate Tax services, from registration and compliance to strategic tax optimization. We help transform regulatory requirements into business advantages.
