The United Arab Emirates will soon be introducing Corporate Tax, effective for financial years starting on or after 1 June 2023, applicable on the net profit of companies or other businesses in accordance with Federal Law No.47 of 2022 on Taxation of Corporations and Businesses. This move aligns the UAE with other countries implementing Corporate Tax.

The main objective behind the introduction of Corporate Tax is to further the UAE’s objectives of accelerating its development and transformation whilst continuing to attract foreign investment and promote economic growth. To reduce the tax burden and compliance costs for emerging and small businesses, the government has introduced a small business relief.  According to the Ministerial Decision No. 73 of 2023, resident taxable persons may apply for small business relief if they meet the following criteria:

• Their revenue for the current and previous tax periods does not exceed AED 3 million per tax period. If the revenue threshold is exceeded, the small business relief will not be available.
• They are not Qualifying Free Zone Persons or members of Multinational Enterprises Groups as defined in Cabinet Decision No. 44 of 2022. Multinational Enterprises Groups are groups of companies operating in multiple countries with consolidated group revenues exceeding AED 3.15 billion.

Businesses that choose not to apply for a small business relief during the tax periods specified in the abovementioned Ministerial Decision may carry forward any incurred tax losses and disallowed net interest expenditure from such periods, for use in future tax periods in which a small business relief is not elected.

For more information on UAE Corporate Tax, please get in touch with Gerry Rogers and Paula Villegas Guevara. Gerry and Paula are members of the Corporate and Commercial practice at Galadari, and are happy to discuss any queries you may have.

Gerry Rogers Partner gerry.rogers@galadarilaw.com

Paula Villegas Guevara Senior Associate paula.villegas@galadarilaw.com