Does Dubai Impose Corporate Tax on All Companies?

Dubai, long known for its tax-friendly environment, recently introduced a corporate tax as part of the UAE's broader economic strategy. Starting June 1, 2023, a 9% corporate tax is imposed on businesses with taxable income exceeding AED 375,000, while income below this threshold is taxed at 0%.

Who Pays Corporate Tax?

Mainland and Free Zone Companies: All companies in Dubai, including those in free zones, must comply. Free zone companies may still enjoy a 0% tax rate if they meet certain conditions.

Foreign Companies: Foreign businesses with a permanent establishment or generating income in Dubai are also subject to this tax.

Exemptions

• Government Entities: Government bodies and their subsidiaries are exempt.

• Charities and Investment Funds: Certain charitable organizations and investment funds meeting specific criteria are also exempt.

Key Considerations

• Compliance: Businesses must accurately calculate taxable income, adhere to transfer pricing rules, and file annual tax returns.

• Impact on Free Zone Entities: While free zone companies can benefit from 0% tax, they must maintain economic substance and comply with new regulations.

Conclusion

Corporate tax Ajman targets larger businesses, while smaller companies and free zone entities may still enjoy favorable conditions. Staying compliant and informed is crucial for businesses navigating this new landscape.