This guide will be updated to reflect the latest developments and announcements, ensuring its relevance and usefulness.
The UAE’s introduction of a 9% corporate tax rate on companies and freelancers earning over AED 375,000 ($102,000) annually is a major step towards diversifying the economy beyond oil revenues and improving financial transparency nationwide.
Our discussion will explain the UAE corporate tax framework exemptions and provide a detailed claim process. This initiative aims to help businesses adapt smoothly to this essential regulatory change.
The Ministerial Decision No. 43 of 2023
The decision outlines the key exemptions for specific entities and income types exempt from corporate tax registration. These exemptions apply to governmental and government-controlled entities, businesses in extractive and non-extractive natural resource sectors, and non-resident entities earning income from the UAE without a permanent establishment. This aligns with global best practices, exempting eligible entities from registering with the Federal Tax Authority. The income threshold for exemption remains unchanged. Businesses generating an annual revenue below AED 375,000 are exempt from corporate tax, effectively applying a 0% rate. This exemption aims to promote the growth of small businesses and startups, encouraging entrepreneurial ventures within the economy.
Personal income exemptions
The legislation also provides tax relief on certain types of personal income to ensure that individuals earning from non-commercial activities remain unaffected. Exempt income includes interest and income from bank deposits or savings schemes, property investments, dividends, capital gains, and income from shares or securities, thereby encouraging personal investment and savings without imposing additional tax obligations.
Clarification on freelancers
It is important to note that freelance professionals are not exempt per se. However, freelancers with an annual net income of less than AED 375,000 are not subject to corporate tax, a measure designed to encourage freelancers to contribute to the UAE’s dynamic economic landscape.
Exemption for natural resource extraction companies
Companies involved in extracting natural resources, particularly oil and gas, will continue to be exempt from corporate tax and be taxed at the Emirate level. This helps maintain the global competitiveness of the UAE’s strategic natural resources sector and attracts further investment.Additional exemptions
Under certain conditions, the law exempts non-profit organizations, investment funds, and public pension and social security funds. In addition, the UAE Cabinet retains the authority to grant further exemptions based on recommendations supporting various economic sectors.
Tax relief for small businesses
To support small businesses, the UAE Ministry of Finance has announced tax relief for companies with a turnover of less than AED 3 million ($820,000). This initiative aims to ease the financial burden on small businesses and encourage continued growth. Eligible companies are encouraged to follow the outlined application process to benefit from this relief.The UAE’s competitive corporate tax framework
Despite introducing a corporate tax, the UAE maintains one of the lowest tax rates in the world at 9%, coupled with extensive exemptions and concessions. This continues to preserve the UAE’s attractiveness as a premier business location. The introduction of this tax regime underscores the UAE’s efforts to promote financial transparency and fiscal prudence while maintaining its international competitive edge.
We invite you to contact us for further clarification or assistance in utilizing these exemptions and reliefs to help your business maximize its benefits under the UAE’s corporate tax framework.