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The National
29-04-2025
- Business
- The National
UAE to waive late registration fees under corporate tax law
The UAE will waive administrative penalties for corporate tax payers who failed to submit their registration applications in time, as part of efforts to boost tax compliance and support businesses. The Ministry of Finance and the Federal Tax Authority said on Tuesday that a Cabinet decision has been issued to make the change. To qualify, companies must file their tax return or annual statements within seven months from the end of their first tax period, as stipulated under the Corporate Tax Law, a statement said. The FTA also confirmed that procedures will be put in place to refund administrative fines collected from those who meet the specified criteria. The decision is aimed at enhancing tax compliance, enabling procedures and easing financial burdens on businesses. It is also expected to 'significantly support' the UAE's efforts to ensure better compliance during the first year of corporate tax implementation, the ministry and FTA said. The UAE introduced the federal corporate tax at a standard statutory rate of 9 per cent from the financial year beginning on or after June 1, 2023. It brought the income of companies exceeding Dh375,000 ($102,110) within the taxable bracket. Taxable profits below that level are subject to a tax of zero per cent. The Ministry of Finance also confirmed later that business owners in the country would be subject to corporate tax only if their turnover in a calendar year exceeds Dh1 million, ensuring that only business or business-related activity income is taxed. Starting this year, the UAE has also imposed a new tax on large companies in the country as part of changes to its corporate tax law. Large multinational enterprises are to pay a minimum of 15 per cent tax on the profits generated in the country – up from the rate of 9 per cent – effective for financial years starting on or after January 1, 2025, the Ministry of Finance said at the time.
Gulf News
23-04-2025
- Business
- Gulf News
How UAE Free Zone firms can capitalise on 0% corporate tax
Free zones are vital to the UAE economy, driving growth both domestically and internationally. These zones offer businesses significant advantages including relaxed foreign ownership rules, simplified administrative procedures, modern infrastructure, developed business communities, and additional legal entity options. The introduction of corporate tax in the UAE represented a major change. While aligning with global standards, the law was designed to preserve the attractiveness of free zones, both designated and non-designated. Standard corporate tax in the UAE is 9 per cent on taxable income exceeding Dh375,000. However, corporate tax rules allow qualifying free zone companies to benefit from a 0 per cent tax rate on certain qualifying activities and transactions. How it works The Corporate Tax Law applies this 0 per cent rate to the qualifying income of a qualifying free zone person (QFZP) from transactions with other free zone persons and specific activities performed within a free zone. Each free zone operates under its own authority with unique local regulations. These authorities oversee business establishment, including legal entities and branches, and manage trade licences for activities conducted in or from the free zone. The 0 per cent corporate tax rate applies for the remainder of the tax incentive period as specified in the legislation registered. Qualifying free zone person requirements A QFZP is a free zone person meeting all conditions in Article 18 of the Corporate Tax Law, as detailed in Cabinet Decision No 55 of 2023. To qualify, a free zone person must: ■ Derive qualifying income from relevant transactions. ■ Maintain adequate substance in the UAE. ■ Satisfy the de minimis requirement. ■ Not elect to be subject to standard corporate tax rules and rates. ■ Comply with arm's length principle. ■ Follow transfer pricing rules. ■ Prepare and maintain audited financial statements. If a free zone person fails to meet all these conditions, he loses QFZP status and becomes subject to standard corporate tax rules and rates. This distinction is crucial because not all free zone companies automatically qualify for 0 per cent corporate tax, and not all income generated by a QFZP necessarily qualifies for this rate. Maintaining adequate substance To maintain QFZP status for a tax period, a free zone person must maintain adequate substance in a free zone (or in a designated zone for distribution activities) throughout that period. This requires the free zone person to: ■ Perform core income-generating activities for that business in the free zone (or designated zone for distribution). ■ Maintain adequate assets and qualified full-time employees within the free Core income-generating activities are the essential, value-adding activities that generate revenue from the business operations in a free zone, or designated zone. A free zone person may outsource these core activities to other entities in a free zone (or designated zone for distribution), provided they adequately supervise the outsourced work. For research and development related to Qualifying Intellectual Property, outsourcing may extend to any entities in the UAE, or non-related parties outside the UAE, with proper supervision. Qualifying income should reflect the level of core activities performed in the free zone, or designated zone, consistent with arm's length principles. A free zone person may perform noncore activities (those that don't directly drive sales or are routine) outside a free zone without affecting their status. Consider Company A, a free zone person with a warehouse in a designated zone used for storage and distribution. Its registered office and employees are in a non-designated free zone, where it performs core distribution activities. Since core distribution activities must be performed in a designated zone, Company A fails to meet the adequate substance requirement despite having a warehouse in a designated zone. However, if all Company A's customers are free zone persons who are beneficial recipients of Company A's goods, it could still benefit from the 0 per cent rate based on transactions with free zone persons. Determining adequate substance To meet substance requirements, a free zone person needs enough qualified fulltime employees in the free zone to perform all core income-generating activities necessary for qualifying income. Since businesses vary, 'adequate substance' is determined case by case using specific criteria, including number of qualified full-time employees, adequate operating expenditure and physical (not virtual) assets.
The National
07-04-2025
- Business
- The National
UAE issues corporate tax rules for foreign investors and entities
The UAE has announced rules that will make a non-resident or juridical entity liable to pay corporate tax in the country, as it seeks to remain competitive globally and ease the compliance burden for foreign investors. The Ministry of Finance issued Cabinet Resolution No 35 of 2025 determining the relationship of a non-resident person in the UAE for the purposes of Federal Decree-Law No 47 of 2022, regarding corporate and business tax. The new resolution defines the cases in which a non-resident legal person, who is an investor in a qualifying investment (QIF) fund or a real estate investment trust (Reit), has a link in the UAE and is, therefore, subject to tax. 'The resolution lays out the rules for when non-resident natural or juridical persons are taxable in the UAE,' said David Daly, a partner at the Gulf Tax Accounting Group in the UAE and a columnist for The National. 'The UAE is belatedly handing a three-edged sword to foreign investors. One side is the certainty of this Cabinet decision and general recognition of the requirement to raise tax revenue. The second is balancing that requirement against remaining internationally competitive in what today is an incredibly fluid global marketplace. 'The final side is the floating anchor. From what date does this law apply? If it's June 2023, when corporation tax launched, then the ship has sailed as decisions have long been made. If it's the date the law was issued, then good. There is time to review and reconsider. The bad? How many more of these decisions are coming? And covering what?' The UAE introduced the federal corporate tax with a standard statutory rate of 9 per cent starting from the financial year beginning on or after June 1, 2023. It brought the income of companies exceeding Dh375,000 ($102,100) within the taxable bracket. Taxable profits below that level will be subject to a tax of 0 per cent. The Ministry of Finance also confirmed in 2023 that business owners in the country would be subject to corporate tax only if their turnover in a calendar year exceeds Dh1 million, ensuring that only business or business-related activity income is taxed. The new decision clarifies when a non-resident juridical investor in a QIF or Reit is considered to have a link in the UAE, thus becoming subject to taxation under Federal Decree-Law No 47 of 2022 on the Taxation of Corporations and Businesses. This follows the earlier issuance of Cabinet Decision No 34 of 2025, which focused on QIFs and qualifying limited partnerships. Under the new decision, a link for a non-resident juridical investor in a QIF will arise under two circumstances. If the QIF distributes 80 per cent or more of its income within nine months from the end of its financial year, the link is established on the date of the dividend distribution. Alternatively, the link arises on the date the ownership interest is acquired if the QIF fails to distribute at least 80 per cent of its income within the same period. Additionally, a link will be created if the QIF fails to meet the diversity of ownership conditions during the tax period in which the failure occurs. For Reits, a similar rule applies. A link is established either on the date of the dividend distribution, if 80 per cent or more of income is distributed within nine months from the end of the financial year, or on the date of ownership acquisition if the Reit does not distribute at least 80 per cent of its income within the specified timeframe. Except in the above cases, a non-resident legal person investing in a QIF and/or Reit will no longer have a taxable presence in the UAE, the law stated. Dhruv Tanna, associate vice president at DIFC-based investment and wealth management firm PhillipCapital, said the decision provided 'much-needed clarity' to non-resident investors in QIFs and Reits regarding their potential tax exposure in the UAE under the corporate tax regime. 'By defining the circumstances in which a nexus is created, this decision distinguishes between passive, diversified investments and structures that either concentrate on UAE real estate or lack sufficient distribution or ownership diversity,' he said. 'Specifically, triggering events – such as failure to distribute 80 per cent of income within nine months or breaching diversity thresholds – serve as practical indicators of when a non-resident investor's involvement becomes sufficiently substantial to warrant tax treatment akin to a domestic presence.' Mr Tanna said this approach aligned with international principles of economic substance and demonstrates the UAE's efforts to maintain competitiveness while meeting global tax transparency standards. It also provides assurance that compliant investment vehicles, particularly those used for genuine portfolio diversification, will not be unintentionally caught in the corporate tax net, he explained. 'Furthermore, the decision reduces ambiguity around tax liability timelines by clearly anchoring nexus creation to either the dividend distribution date or the acquisition date, depending on compliance status,' Mr Tanna added. "This is particularly relevant for cross-border tax planning, fund structuring and Reit disclosures. 'Overall, Cabinet Decision No 35 reinforces the UAE's commitment to balancing fiscal responsibility with its reputation as an attractive, low-barrier investment hub – especially for institutional investors seeking certainty and regulatory sophistication.'
Khaleej Times
06-04-2025
- Business
- Khaleej Times
UAE: A safe haven amid current global economic turbulence
In an era marked by escalating global trade tensions and economic uncertainty, the UAE stands out as a beacon of stability and opportunity. Recent developments, including the imposition of sweeping tariffs by the United States and retaliatory measures from China, have unsettled markets worldwide. However, the UAE's strategic economic policies and favourable tax environment continue to attract high-net-worth individuals and multinational enterprises seeking a secure and advantageous investment climate. Global trade tensions: A catalyst for economic shifts The US administration has announced aggressive tariffs ranging from 10 per cent to 50 per cent on imports from various nations, triggering a $2.5 trillion loss on Wall Street. China responded with a 34 per cent tariff on all US imports and imposed export controls on rare earth elements critical for high-tech industries. These actions have exacerbated global economic instability, prompting investors and businesses to seek more predictable and favourable environments. UAE's favourable tax regime: a competitive edge Amid this global upheaval, the UAE has implemented a corporate tax framework that balances competitiveness with compliance to international standards. Effective June 2023, the UAE introduced a 9 per cent corporate tax on annual taxable profits exceeding Dh375,000, while profits up to this threshold remain tax-free. Additionally, in alignment with the OECD's global tax reforms, the UAE has announced a 15 per cent minimum tax on large multinational enterprises with global revenues exceeding Dh3.15 billion, effective January 2025. This measured approach ensures a business-friendly environment while adhering to international tax fairness initiatives. Surge in high-net-worth individuals The UAE's stable economic policies have made it a magnet for high-net-worth individuals (HNWIs). Projections indicate that the UAE will attract up to 6,700 HNWIs in 2025 alone, bolstered by migrations from the UK and Europe Over the next five years, the country is expected to welcome more than 30,000 millionaires, further solidifying its status as a global wealth hub. Boom in the real estate market This influx of affluent individuals has significantly impacted the UAE's real estate sector. Dubai, for instance, achieved Dh100 billion in real estate sales by March 4, 2025—the fastest pace in its history. Luxury properties are in high demand, with areas like Palm Jumeirah and Downtown Dubai experiencing record-breaking sales. Notably, nearly 20 per cent of homes in Dubai are now valued at over $1 million, turning many homeowners into 'accidental millionaires'. A neutral and preferential business environment The UAE's neutrality in global geopolitical conflicts and its preferential business policies have positioned it as an attractive destination for investors worldwide. The government's commitment to economic diversification, infrastructure development, and innovation fosters a conducive environment for business growth. Conclusion In light of escalating global trade tensions, rising inflation, and economic uncertainties, the UAE emerges as a preferred destination for investors and businesses seeking stability and growth. Its favorable tax regime, strategic neutrality, and robust economic policies not only attract high-net-worth individuals but also position its real estate market as a prime investment opportunity on the global stage.
The National
25-03-2025
- Business
- The National
UAE Central Bank fines lenders and insurance companies Dh2.6m for tax standards violations
The UAE Central Bank has imposed Dh2,621,000 ($713,700) in fines on five banks and two insurance companies operating in the Emirates for not following tax compliance standards. These financial institutions were penalised for non-compliance with the reporting procedures required by the Common Reporting Standard and Foreign Account Tax Compliance Act guidelines, the banking regulator said in a statement on Tuesday. The Central Bank 'affirms that this step enhances the quality of the UAE's financial system, and aligns with its commitment to global initiatives promoting the integrity and transparency of tax systems and combat tax evasion', it said. Those banks and insurers that were fined were not named by the Central Bank. The UAE, the Arab world's second largest economy, introduced the federal corporate tax with a standard statutory rate of 9 per cent from the financial year beginning on or after June 1, 2023. It brought the income of companies exceeding Dh375,000 within the taxable bracket. Taxable profits below that level are subject to a tax of zero per cent. The Ministry of Finance also confirmed later that business owners in the country would be subject to corporate tax only if their turnover in a calendar year exceeds Dh1 million, ensuring that only business or business-related activity income is taxed. In December, the UAE also announced that it will impose a new tax on large companies in the country as part of changes to its corporate tax law. Large multinational enterprises are to pay a minimum of 15 per cent tax on the profits generated in the country – up from the current corporate tax rate of 9 per cent – effective for financial years starting on or after January 1, 2025, the Ministry of Finance said at the time. The UAE also introduced 5 per cent VAT on a majority of goods and services in 2018 as part of its push to diversify the economy and reduce its dependence on oil. In September, the Central Bank also fined a lender operating in the country Dh5 million for breaching anti-money laundering regulations, as it continues its fight against illicit financial activity in accordance with international standards.
