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UAE Ministry of Finance Clarifies Some Key Aspects of Newly Introduced Corporate Tax Laws

UAE Ministry of Finance Clarifies Some Key Aspects of Newly Introduced Corporate Tax Laws


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On 31 January 2022, the UAE Ministry of Finance (MoF) made the breakthrough announcement that a new federal corporate tax (CT) system will be implemented in the UAE, effective financial years commencing on or after 1 June 2023. The MoF recently clarified the following key aspects of this new CT regime.

Status of Regulation

The newly issued decree law for Corporate Tax would not have separate ‘Executive Regulations; however, would issue various cabinet decisions from time to time with detailed guidance for implementation.


The CT registration will be independent of the VAT registrations and all businesses across all the emirates would be required to register even if the taxable income is below the threshold of Dh375,000 or exempt.

Over the next few months, the Federal Tax Authority (FTA) will send out an ‘invitation to register’ to select businesses. There may not be any penalty relating to registration once the businesses register before the due date for tax return submission which is nine months from the end of the relevant financial year. Unlike VAT, there is the scope of deregistration from CT.

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CT has been termed as a misnomer as besides corporates, even individuals including social media influencers, freelancers, sole proprietorships, or civil companies could be subject to this taxation.

Free Zones

The details of “Qualifying Free Zones” and “Qualifying income” are expected to be released soon. FZ business will require to ensure adequate substance in the UAE and fulfill other criteria to become eligible for tax exemptions.

Qualifying Group

A business with multiple Entities would need formal approval from the FTA to become a ‘qualifying group,’ not requiring intra-group transactions for tax purposes. A ‘tax group’ is allowed to submit a single tax return for all members of the group. If a business has formed a VAT tax group, it is not necessary to form a similar CT tax group or vice-versa.

Anti-abuse Rules

Businesses must furnish valid commercial reasons for reorganization without which any claim for obtaining tax benefits could be disregarded under anti-abuse rules.
Small Business Relief
Besides the taxable threshold of Dh375,000, businesses eligible for ‘small business relief’ would be considered as having Zero taxable income. More details on the small business relief are expected soon.
International Taxation
The location of key management personnel and/or board of directors, and of decision-making will determine the Place of Effective Management (PoEM). Should the PoEM of a foreign company be in the UAE, it will be covered under CT.
Documentation and Accounting

Taxable income will be computed from the books of accounts and the businesses do not need to prepare a separate set of books for tax purposes. Global accounting standards, such as IFRS, are acceptable, and for small businesses, simplified accounting procedures may be allowed.

All businesses need to retain and maintain accounting records for a minimum period of seven years even when a business is not taxable, claimed exemption, or did not pay tax in a particular year to facilitate future tax assessments.

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