Corporate Tax

Corporate Tax (CT)

Corporate Tax (CT) is becoming a reality in the United Arab Emirates (UAE). With effect from financial years starting on or after 1 June 2023, businesses will be subject to UAE CT. Specifically, UAE companies and other legal persons incorporated in the UAE, foreign legal entities that have a permanent establishment in the UAE and limited liability partnerships will be subject to UAE CT. As expected, the introduction of CT will bring significant compliance obligations on companies in the form of tax returns, Transfer Pricing documentation and document retention. In addition to these, there will also be a definitive impact on the overall financial position of the companies as elaborated below.

Purchase costs: Suppliers may revise their prices upwards to protect their own margins from being eroded due to the additional CT cost. While suppliers may adopt different strategies in revising their prices, companies can generally expect their costs to increase once UAE CT comes into force thereby eroding their existing (pre-UAE CT) margins.

Sales pricing: Companies that are subject to UAE CT and have generated taxable income will be liable for UAE CT which will impact their existing margins. In order to maintain their profitability, companies will have to review their pricing strategies to ensure that their economic position is maintained or at least not too adversely impacted.

For further details visit UAE government portal