The Ministry of Finance has issued an Explanatory Guide for Federal Decree Law No. 47 of 2022 on Taxation of Corporations and Businesses or the Corporate Tax Law, which provides the legislative basis for imposing a federal tax on corporations and business profits effective for financial years beginning on or after June 1.
The guide features an article-by-article explanation of the meaning and intended effect of the provisions of the Corporate Tax Law and its implementing decisions that may be used for interpretation and application.
In a statement released on Friday, Younis Haji Al Khouri, Undersecretary of the Ministry of Finance, said: “The Ministry of Finance is working to provide clarity and guidance to those who are or may be subject to UAE’s Corporate Tax, so they can understand the provisions of the law and why it is enacted. The Explanatory Guide reflects our continued commitment to ensuring that taxable persons are supported and provided with information before the law’s entry into effect.”
Moreover, the guide explains the various features of the UAE’s Corporate Tax regime, which would spur business activity and reduce the compliance burden for taxable persons.
Under the law, a zero percent corporate tax rate will be applied for taxable income of up to AED375,000, and a zero percent Corporate Tax rate for qualifying free zone persons, in recognition of the importance of free zones to the development of the UAE historically.
On the other hand, a nine percent headline Corporate Tax rate will be implemented for taxable income above AED375,000.
Meanwhile, exemptions will be given to certain entities considered to be essential to the social fabric of the UAE such as government entities, investment funds, pension and social security funds, public benefit organizations, and natural resource businesses.
