• The term “tax” refers to a fee collected/levied by a country’s or state’s government.
• Taxation, on the other hand, refers to the act of levying taxes. It covers everything from the creation of rules by the government to the passage of legislation by the parliament, as well as the act of tax assessment, the role of tax commissioners, appellate authorities, and more.

The laws governing corporate taxes vary slightly from emirate to emirate, but in general, taxes are only levied at federal level on foreign bank branches and foreign oil or gas producing companies.

An Excise Tax is also levied on certain goods that are deemed harmful to human health or the environment. And, most recently, there has been an imposition of Value Added Tax (VAT) on the majority of goods and services.

Furthermore, companies that remit income in the form of interest, royalties, or dividends are exempt from withholding tax by the Federal Tax Authority UAE (FTA UAE).

Corporate Tax is a form of direct tax, also referred to as “Business Profits Tax” or “Corporate Income Tax” in other jurisdictions. The tax is directly imposed on the profit or net income of businesses or corporations operating in the UAE.

Introducing corporate tax across the UAE indicates the UAE’s commitment to meeting international taxation standards to ensure tax transparency throughout each state and to prevent insufficient tax practices. It will help enhance the UAE’s position as an ideal global hub for investment and businesses worldwide helping in accelerating its strategic development and ensuring achieving goals on a wider scale.

The Corporate Tax, UAE is a federal tax which is why each business or corporation operating in any Emirate of the UAE is subject to the CT.

The corporate tax (‘CT’) will be levied at the following rates:

• 0% if the taxable income does not exceed the threshold limits.
• 9% if taxable income exceeds the threshold (AED 375,000).

UAE companies can apply to form a Tax Group and be treated as a single taxable person if the following conditions are met:

• The parent entity holds 95% ownership, voting rights, and the right to the assets and profit of the group entities.
• Neither the parent nor the subsidiary is an exempt entity. This condition is relaxed when the subsidiaries are held by a Government Entity.
• Neither the parent nor the subsidiary is a qualifying free zone.
• Both the parent and the subsidiary follow the same financial year and prepare their financial statements using the same accounting standards.