FAQs UAE Corporate Tax

Q1: Is taxation applicable to a company’s gross revenues or net profits?

Ans: Taxation is applied only to the company’s net profits as outlined in tax legislation, not its gross revenue.

Q2: In the wake of COVID-19’s impact on businesses, why is the imposition of corporate tax necessary?

Ans: In alignment with global tax agreements like OECD, the UAE is obligated to implement corporate tax. The objective is to deter tax evasion, prevent double taxation, and exhibit the UAE’s commitment to transparency and responsible tax practices.

Q3: What are the tax implications for companies registered in free zones?

Ans: UAE’s free zones, known for their tax-free status, will also offer tax incentives to investors who don’t engage with mainland UAE businesses, ensuring growth without affecting their status.

Q4: Can salaries to directors, partners, and family members be utilized to reduce taxable corporate profits?

Ans: Though common, such practices are monitored closely worldwide. UAE’s tax legislation is expected to regulate these payments to prevent misuse for tax avoidance.

Q5: Can accounting policies be manipulated to avoid taxes, such as depreciation policy?

Ans: Tax laws clearly define depreciation methods, leaving little room for creative accounting.

Q6: Must businesses operating under multiple licenses file multiple tax returns?

Ans: Tax laws generally allow businesses under common control to be taxed as a group, reducing the need for separate filings.

Q7: Will a withholding tax regime be in place?

Ans: As per current information, a withholding regime is not anticipated.

Q8: How can taxes be minimized?

Ans: Tax planning leverages existing tax laws to manage business activities efficiently, utilizing available concessions and reliefs. Tax avoidance is lawful, while tax evasion bears legal consequences.

Qualifying Shareholding / Qualifying Intra Group Transaction:

Dividends and capital gains from qualifying shareholdings are exempt from UAE CT. These are ownership interests in UAE or foreign companies that fulfill specified conditions in UAE CT law.

Certain qualifying intra-group transactions and corporate reorganizations are also exempt if they meet the necessary conditions.