Maxims Auditors & Consultants

WHAT IS CORPORATE TAX?​ ​

Businesses and individuals with a commercial license, as well as those in the UAE’s Free Zones conducting activities in the mainland, may be subject to Value Added Tax. Corporate tax services in UAE, Foreign entities and individuals who engage in regular or ongoing trade or business activities in the UAE will also be liable. Real estate management, construction, development, agency and brokerage activities are also part of the scope of VAT.

HOW IS A TAXABLE PERSON SUBJECT TO CORPORATE TAX?​

The Corporate Tax Law dictates how much income tax must be paid based on a person or entity’s residence or source of income. The classification of the taxpayer determines which basis of taxation should be used.

A Resident Person is taxed on any income earned both in the country they live in and abroad. They are subject to taxation based on their place of residence.

A Non-Resident Person will only be subject to tax on income earned from activities or investments in the UAE.

The place where a company is taxed for corporate purposes does not depend on where the person lives or is based, but is based on the factors established by the Corporate Tax Law, in accordance with Article 5 of the OECD Model Tax Convention on Income and Capital.

Registering, filing and paying Corporate Tax​

Businesses and individuals with a commercial license, as well as those in the UAE’s Free Zones conducting activities in the mainland, may be subject to Value Added Tax(VAT). Corporate tax services in UAE, such as those for foreign entities and individuals who engage in regular or ongoing trade or business activities in the UAE, will also be liable. Real estate management, construction, development, agency and brokerage activities are also part of the scope of VAT.

A Resident Person, referred to as a Parent Company, may apply to the Authority for permission to form a Tax Group with one or more other Residents, referred to as Subsidiaries, taking advantage of corporate tax services in UAE. In order to do so, the Parent Company must meet the following requirements:

• Legal entities known as “Resident Persons” are entities that have a distinct legal identity.
• The Parent Company must include the financial results, assets, and liabilities of each Subsidiary in their consolidated financial statements for the relevant Tax Period.
• This means that any transactions between the Parent Company and the Subsidiary, which is a member of the Tax Group, must be eliminated, as the Parent Company owns at least 95% of the share capital of the Subsidiary.