Tax exemptions in UAE
You may wonder, “Is UAE tax free”?
The UAE imposed an unprecedented profit-sharing tax. Effective June 2023, the UAE levied a 9% tax rate on businesses and independent contractors making more than AED 375,000 per year.
The action aimed to increase financial openness and lessen reliance on energy earnings.
Several companies and income categories face tax exemption in the UAE. This article will discuss tax exemptions in UAE and offer a thorough how-to manual to assist companies in navigating the country’s recently changed tax system.
UAE Tax Exemptions
Income < AED 375,000
Companies that make less than AED 375,000 annually are exempt from UAE corporate tax rules.
This indicates that those under the threshold will pay no taxes. This exemption promotes entrepreneurial and economic development by allowing small firms and startups to continue operating without paying extra fees.
Individual Income in Personal Ability
Certain individual profits are excluded from taxation under the UAE corporate tax registration law, offering relief to those who do not engage in commercial activity.
These exclusions cover dividends, capital gains, additional revenue from stocks or commodities, interests, revenue, other income from bank deposits or savings plans, and real estate investments.
This approach ensures people can save and invest without worrying about paying more taxes.
Additional Exemptions
If they meet specific requirements, investment funds, public pension and social security funds, and public benefit corporations will not be subject to the coming tax.
The UAE Cabinet may also approve further exemptions based on the finance minister’s recommendations.
Persons Exempt from UAE Corporate Tax Law
Corporate tax exemption in the UAE guarantees that public and private entities can continue contributing to the nation’s growth without paying more taxes. Thus, it supports several economic sectors in the United Arab Emirates.
The following individuals are automatically facing corporate tax exemption in the UAE:
- Federal and Emirate governments of the United Arab Emirates, along with their agencies, commissions, and other governmental bodies;
- Businesses designated in a Cabinet Decision that are wholly owned and managed by an authoritative body and that perform a required function;
- Companies that extract natural resources from the United Arab Emirates or carry out associated non-extractive tasks that, if met, are subject to taxes at the Emirate level
- Qualifying Public Benefit Entities defined in Cabinet Decision No. 37 of 2023 or any later appropriate decisions.
Following permission of an application filed with the Federal Tax Authority, the following individuals become exempt from UAE Corporate Tax:
- The qualifying Investment Funds that satisfy the requirements
- Public or private pension or social security funds that satisfy the requirements outlined in Ministerial Decision No. 115 of 2023.
- UAE juridical persons engaged in the activities listed in paragraph (h) of Clause 1 of Article 4 of the Corporate Tax Law are entirely controlled and maintained by specific exempted organizations.
Final Words
Companies must comprehend the tax exemptions in the UAE available to them and know how to take advantage of them.
By understanding the corporate tax exemption in the UAE and the procedures for obtaining it, organizations can ensure that they meet the new tax regulations and limit their tax payments.
Paci.ai can be your best finance management and tax filing partner. We have our experts to look through the changing UAE corporate tax rate.
Connect with us now to understand the tax exemptions in UAE.
