UAE has implemented Corporate Tax in June 2023 with a standard rate of 9% applicable on business entities having taxable income over AED 375,000. The following article aims to elaborate on how the UAE computes corporate tax for companies.
When calculating the amount of corporate tax payable from the calculator then the first step is calculating the taxable profits of the company. Taxable income can be different from accounting income as reported in the income statement due to several adjustments.
Some key points to note in determining taxable profits are:
Once the taxable profit is determined then UAE corporate tax rates and calculations are applied to determine the amount of tax that the firm is required to pay.
Company | Taxable Profits (AED) | Tax Calculation | Tax Payable (AED) |
---|---|---|---|
Company A | 300,000 | Profits below threshold of AED 375,000. Tax rate is 0% | 0 |
Company B | 500,000 | Profits above threshold. Taxable amount = 500,000 - 375,000 = 125,000. Tax rate is 9% on taxable amount | 125,000 x 9% = 11,250 |
Company C | 1,000,000 | Profits above threshold. Taxable amount = 1,000,000 - 375,000 = 625,000. Tax rate is 9% on taxable amount | 625,000 x 9% = 56,250 |
Large MNC | 200,000,000 | Tax rate is 9% on first AED 375,000 Tax rate is 15% on excess over AED 150 million. Taxable amount = 200,000,000 - 375,000 - 150,000,000 = 49,625,000 | 375,000 x 9% = 3,375 + 49,625,000 x 15% = 7,443,750 Total tax = 7,443,750 + 3,375 = 7,447,125 |
Read more: How Can a Tax Consultant Help Your Corporate Tax Preparation in UAE?
In addition to taxable profits and rates, there are few other points to consider: In addition to taxable profits and rates, there are few other points to consider:
For the right computation and discharge of corporate tax liabilities, companies can consult licensed tax agents in UAE.
For corporate tax calculation in the UAE, it is essential to understand that determining the taxable amount involves computing the taxable profit. This profit is derived from the accounting profit, with necessary adjustments for exemptions and non-deductions. Additionally, companies must maintain accurate records to support their calculations and ensure compliance with tax regulations. Therefore, it is important for businesses to seek guidance from corporate tax consultants in the UAE to fully understand the methods of corporate tax calculation and ensure adherence to UAE laws.