Tax and Legal

Dubai Taxation Policies 2024 for Foreign Companies

Dubai Taxation Policies 2024 for Foreign Companies

The United Arab Emirates used to be a very low tax jurisdiction for many years. Citizens are not required to pay taxes on their incomes. In addition, in the United Arab Emirates, no type of company tax is to be paid by a majority of companies. Domestic and private fossil fuel extraction industries provide much of the state’s income. The amount of tax to be paid by these sectors amounts to around 50% of their income.

However, in 2023, the country began to make a major shift in its fiscal policy by introducing 9% taxation on companies. The decision was considered a strategic move to diversify its sources of revenue, which would allow it to maintain its position as the world’s largest commercial centre.

Interpretation of Dubai Taxation Policies 2024

In the Dubai taxation policies 2024, a foreign tax of Dubai of 9% company tax has recently been imposed. This is done following Cabinet Decision No. 49. Dubai is seeking to diversify its income streams through a new tax structure following major policy changes. A new tax regime will apply to you if your company has a turnover of more than AED 1 million or around USD 270000 annually. It does not discriminate based on your nationality or residence.

The Dubai Taxation Policies 2024 consider any activity that is carried out on a regular, ongoing, and autonomous basis to be business. A business activity is defined as any transaction, activity, or sequence of transactions carried out by an individual during the course of his or her business activities. But salaries waged to employees, or if your revenue is from personal investment or a real estate investment income, are not measured business activities.

In Dubai taxation policies 2024, you do not need to register for corporation tax if you have no business or commercial activities. This means that you have no organizational burden or financial obligation related to taxation. You’ll be able to make more efficient use of your resources. You have several tax exemptions if your business operates in one of the strategic sections. The reduction of operating costs and increase in profits will give you an important advantage.  

The strategic sectors contain government-controlled units, Limiting public-benefit personnel, natural resource industries, investment funds, social-safety funds, and private pensions. Let’s say your company does business in free zones. They may be eligible for zero tax benefits if they are subject to specific qualifying transactions and activities.

Funds, wealth and investment management services, manufacturing and processing of goods or materials, reinsurance services, holding of shares and other securities, ownership, management, and operation of ships are also part of these activities. However, not only the abovementioned activities are subject to zero tax benefits, so check with your freezones. As the global average corporate tax is around 23%, the tax rate in the United Arab Emirates is still very low at 9% 

The registration process for Corporate Tax

From the first financial year, starting on or after 1 June 2023, the implementation of corporate tax in the United Arab Emirates will take place. Regardless of its existing VAT registration, any company should register for corporate income tax, including those operating in free zones. This process is facilitated by the Emara Tax portal on the Federal Tax Authority website, which provides a seamless registration experience.

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The process of registering for Dubai Tax 2024 is easy, and it will not take more than 30 minutes to complete. The portal may also be used to complete the corporate tax registration of companies already registered for VAT and excise duty.  A new user profile for Emara Tax needs to be created by businesses that are not yet included in the Excise and VAT register. In addition, they need to select a corporate tax registration and complete the application process. It is necessary to provide accurate information and update supporting documents for your application to be successful.

What should one do before Dubai Taxation Policies 2024?

As for many businesses, the UAE Corporate Tax will become operative from 1st January 2024, which means there will be many things to contemplate to be prepared for the application of the Dubai Tax 2024. This includes knowing the CT inferences of your legal, economic, and operation profile, as well as planning the people and many other things.

Know the Free zone Footprint.

If your business is in the Free zone, you will have the opportunity to get a 0% CT rate profit. Also, you should keep in mind that the conditions to get into QFZP are not that simple, and it should not be assumed that all these complexities will be met.

Analyse Group Structure

A Group’s property, funding, investment, and working structure will affect its tax profile. Also, it may impact its capability to make certain elections like grouping on some income like shares and gains.

Analyse Financial profile

The Fiscal profile of the businesses will mainly drive every Taxpayer of UAE CT profile. The disclosures, accounting policies, and admissions that are not very carefully measured admissions can potentially lead to unplanned tax outcomes.

Who will be a Taxable person in the United Arab Emirates?

In Dubai taxation policies 2024, all companies operating in Dubai that are not registered in a free trade zone are liable to pay corporate income tax. Branches and subsidiaries of foreign companies shall also be covered. If certain conditions are met, companies in free zones may be exempted from corporate income tax.

Lower tax rates may also benefit businesses active in specific sectors, such as tourism. To help expand the country’s economy and open up new sources of revenue, a new corporate tax regime has been introduced in Dubai tax 2024. To develop infrastructure to develop infrastructure projects and support startups and small businesses, the government of Dubai intends to use corporate income tax revenue.

Who will not be liable for Corporate Tax? 

No doubt corporate Tax has a broad reach in Dubai, but there are certain exemptions in the Tax framework; entities that are excluded from Dubai Taxation Policies 2024 are as follows;

The current Emirate level of corporation taxation still applies to enterprises engaged in extracting natural resources. This will ensure that the United Arab Emirates remains a key contributor to regional economies in terms of its crucial oil and gas sector. A United Arab Emirates company is exempted from corporation tax on dividends and capital gains derived from its qualifying shareholdings.

If the reorganisations and qualifying intra-group transactions meet the required conditions mentioned in the tax regulations, they will be exempted.

In the Dubai taxation policies 2024, Corporate tax does not apply to individuals who receive salaries and other employment income, whether in the public or private sector.

The other incomes and interest individuals from bank deposits or savings earn will not be taxed under the corporate tax framework.

The income received by the foreign investors, which they earn from capital gains, dividends, interest, royalties, and investment returns, is all exempted from corporate tax in Dubai Taxation Policies 2024.

In the Dubai Taxation Policies 2024, Corporate tax is not payable by individuals who make personal property investments in their capacity. The exemption from corporate tax also applies to surpluses, capital gains, and other income earned by individuals from the ownership of shares or securities in their capacity.

Deadline for corporate Tax return filing in Dubai tax 2024

Businesses in the United Arab Emirates shall be required to submit their tax returns and pay corporate taxes to the Federal Tax Authority (FTA) within a period of nine months from the end of the relevant tax season. E.g. a company with its initial tax period from June 1, 2023, to February 28, 2025, shall have until September 30, 2025, whereas a company having its initial tax period starting on January 1 2024, has until December 30.

The commitment of the United Arab Emirates to ensure the smooth implementation of corporate tax policy is at the heart of this move. The advantages of filing a corporate tax return include efficient cost and time management, a single tax return for a group, and the ability to combine the amount of group tax paid, where certain companies make a taxable profit while others may have a loss.

Documents Required for Company Tax Registration

The following documents shall be required to complete the corporate tax registration of legal persons:

  • The Emirates ID of the authenticated signatory.
  • Authorisation proof of POA/MOA for the signatory
  • license to trade or to operate a business
  • Passport

The requirement of FTA is for businesses to deliver precise percentages of shareholding that resemble the real holdings of the owners and align the date with the inauguration date of the company as per the MOA. The entities shall also state the tax period. Individual registration is required for businesses wishing to set up a company tax group. According to the FTA guidelines, they must obtain a tax registration number and make an application for the establishment of a corporate tax group in due course.

Effect on Economy

The United Arab Emirates has been relying on oil as its main foundation of income for years, putting it at risk from variations in the global crude market. Now, in the Dubai Taxation Policy 2024, The government will be able to diversify its revenue streams, reduce dependence on oil, and achieve a more stable source of income with the overview of this new tax system.

This will also provide the government with a new source of income that can be used to finance essential state services, infrastructure, and various initiatives that could contribute to stimulating growth. In addition, the new CT will contribute to the promotion of the country’s image as a well-regulated and stable business environment.

How can the UAE tax Rule benefit small businesses?

In Dubai’s taxation policies in 2024, Small businesses will be considered to be an essential source of employment creation and technological invention by a larger number of people. In Dubai, small business owners have long been praised for their contribution to the country’s economy. In particular, their impact on the growth of employment and innovation. This will benefit small businesses and startups as a result of the new federal income tax policy. Some of the ways that a United Arab Emirates corporate tax on multinational companies will help SMEs are shown below.

Reducing Corporate Concentration

The reason for the slowing of efficiency and the economy is corporate concentration in general. Net income, assets, revenue, and Market capitalization are the more evenly distributed among the largest firms. The increasing concentration shows that big companies increase their prices while lessening their salaries, which offers less-quality goods and services and restrictive output. Dubai’s taxation policies in 2024 will impact large enterprises and multinationals, but the expanding companies will benefit startups and small businesses. 

Encouraging Healthy Competition

In addition to suffocating competition, corporate concentration is linked to rising inequality and increasing political influence for large companies. A sense of resentment among small enterprises can be generated by the concentration of wealth and power in the hands of a few large corporations. Therefore, Dubai’s taxation policies in 2024 will align with the world’s efforts to promote fair competition between investors worldwide; the United Arab Emirates has introduced a business tax.

Contending Tax Evasion

Thanks to their ability to exploit economies of scale, companies have been credited with raising competition and boosting the welfare of customers. It is well known that big companies, which are more efficient in comparison to their small counterparts, have increased efficiencies. Only when the net income exceeds INR 75.96 lakh, the tax is levied on Indian entrepreneurs planning to do business in Dubai. In addition, the Dubai taxation policies 2024 will help SMEs to distinguish themselves on the market and keep a check on corporate tax avoidance.

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Transparent corporate tax system

As the economy of the United Arab Emirates is growing and becoming a more prominent global player, it would make sense for the government to take action. Tax transparency allows for a highly detailed understanding of the business activities of MNEs using taxation data. To conduct business as a corporation, the United Arab Emirates company tax is an appropriate price to be paid.

This would allow it to pay for the costs of government services that benefit businesses, as well as receive a share of revenues from large companies. As a result, issues related to the digitization of the global economy will also be addressed by the new tax regime.

Prevention of Malicious tax practices

To comply with international standards on transparency of taxation and to avoid harmful practices, the new corporate tax regime, i.e. Dubai tax 2024, takes several steps. The administration will make it easier for the United Arab Emirates to deal with the challenges posed by the digitization of the global economy and other issues. In addition, applying a different corporation tax rate to large multinational companies meeting the criteria set out in the above plan will support the setting up of a worldwide minimum tax rate.

Features of Corporate Tax

Tax Entities: Private Limited Liability companies, residents, and immigrants doing business in Dubai, as well as Limited Liability Companies LLCs, are covered by this tax. These bodies shall provide the details of transactions for the financial year.

Tax credits: Foreign tax income and related entities may be eligible for a tax credit.

Taxation of excluded group: Sole taxable entities shall be those companies that do not operate in the free zones of Dubai.

A progressive tax system: Companies with annual income of less than AED 375,000 shall not be subject to taxation, and the tax rate shall be progressively increased based on their income. The percentage is usually higher than 9%

Companies are obliged to submit evidence of their income to benefit from corporate tax advantages and comply with annual taxation commitments. Compliance with these regulations guarantees compliance and enables businesses to play an important role in supporting economic stability and contributing to the development of the United Arab Emirates. 

Conclusion

Dubai was well known for its tax-free policy, also called a tax haven, because of its tax-friendly business environment. However, to foster economic growth and attract foreign investment, the UAE government has recently implemented taxes. Dubai taxation policies 2024 will result in the UAE losing its title of Tax-friendly country, but the nation is moving in the right direction, leading to more success with the hope that the policies are used correctly.

FAQs

  1. What is the VAT rate in Dubai taxation policies in 2024?

    In the Dubai Taxation Policies 2024, there is no introduction or changes in its Value Added Tax.

  2. How can I get zero tax in Dubai?

    In Dubai, all private income is 100% tax-free. All you need to make sure is that you hold a residence visa and officially have no place to stay outside Dubai.

  3. What is a category 3 company in UAE?

    If there is a sign that the company is supporting a specific nationality for employment and not paying each employee from the Wage Protection Scheme and also with no corporation with Nafis, then it falls into the third category.

  4. What taxes do companies pay in the UAE?

    Companies in Dubai pay Corporate Tax, excise tax, and VAT.

  5. What is the new corporate tax law in Dubai?

    MOF introduced in January 2022 that they will present Federal corporate tax on whatever the net profit businesses are getting. It can become valid from 1 June 2023 or 1 January 2024, which will depend on the financial year businesses are following.

  6. Why is Dubai introducing Corporate Tax?

    Dubai's taxation policies for the 2024 regime are made to cement the UAE's position as a foremost global centre for business and speculation and to increase Dubai's development and conversion to its strategic goal.

  7. Has the UAE corporate tax replaced the excise tax in the UAE?

    No, both taxes is different and will apply in the UAE

  8. Will I continue to pay service fees to the federal and emirate Governments now that the UAE has introduced Corporate Tax?

    Yes. You have to pay the Emirate and Federal Government the applicable fees.

  9. What will be the role of the Ministry of Finance?

    The MOF is a skilled authority for the objective of the exchange of statistics for tax purposes and bilateral/ multilateral tax agreements. They also have the authority to issue further rules for UAE Corporate Tax and Federal Tax.  

  10. Will donations made to charities be deductible?

    Yes. Donations should be made to a charity that is mentioned in Cabinet Decision No. 37 of 2023 or any consequent applicable decisions as a Qualifying Public Benefit Entity.

  11. What is Dubai TAX 2024?

    A 9% corporate tax rate that was recently introduced in UAE for corporate tax is the Dubai tax 2024.

  12. Will I have to pay UAE Corporate Tax alongside VAT in the UAE?

    If your business is registered under VAT, you will pay corporate and VAT tax distinctly; if you are not registered for VAT, you also have to pay corporate tax.

  13. What are the 5 taxes in UAE?

    The 5% VAT rate applies to goods and services with the exception of a 0% rate.

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