top of page

How Your UAE Business is Affected by Corporate Tax

With the corporate tax's looming 2023 implementation date, experts are discussing the impact of CT on stakeholders. Corporations are be required to pay taxes for 1 year, prior to accumulating capital gains. This transition could affect smaller businesses, government coffers, and the overall economy.

Affecting the working capital of businesses, these taxes would require companies to plan ahead. Businesses would need to assess the gaps in their budgets and pay the taxes at nine per cent of adjusted taxable profits over Dh 375,000. It would be best to budget accordingly when calculating the steps to take to minimize risk related to this new norm.

Companies within the UAE who are looking to reduce their tax burdens may consider restructuring under single CT registration and re-evaluating losses and profits. Commonly, those with common ownership and control opt out of this strategy in an effort to focus on each entity independently.

Corporate tax in the UAE will require companies’ liabilities to pay this time to be adjusted for losses carried forward from previous years of operation.

In order to create a competitive environment, the UAE has implemented a flat 20% corporate tax for businesses with a taxable income of up to Dh375,000. Start-ups and new business should not be discouraged from starting due to higher initial costs.

Under a role for corporate tax, businesses must worry not only about their product but also the taxes on those products. For some, the costs of implementing and training will outweigh the benefits of new tax legislation and they will decline to cooperate with CT implications. Other companies see new tax legislation as an opportunity to minimize business expenses and clamp down on profit-eating taxes – increasing the demand for experienced tax professionals

The end-users would face the adverse impact of the increased sales prices if businesses incorporate a corporate tax into their pricing. Demand for goods and services would lessen due to decreased purchasing power.

The UAE government understands the consequences of SDT on foreign direct investment (‘FDI’) within the country has based, creating a wedge between the pretax and post-tax returns on FDI. To minimize this risk there are a number of incentives put in place for investing companies, such as implementing a top rate for corporate tax to all businesses at 20% which is advantageous to other countries, double taxpapers amongst investors and free zones who will provide incentives to development for a certain amount

With soaring income tax rates, both businesses and consumers are at risk. As the rate of personal consumption decreases, there is a large opportunity for businesses to thrive. Organizations have proven their ability to create innovative solutions with advanced technologies to meet customer needs.

Corporate Tax is one of the major revenue streams for states globally, which will give the government funds to invest on behalf of its public. The UAE Government would spend this on world-class infrastructure, hospitals, roads, and various medical facilities accessible to the public.

The introduction of corporation taxes would lead to a more diversified economy as oil-generated income would be reduced. It is seen as a sign of a healthy and matured economy as diversification leads to less reliance on one revenue stream.

Corporate Tax has immense impact on the economy of UAE, both good and bad. When foreign investors look at it as an unnecessary fee, it can steer them away from investing in UAE projects. It would be more harmful to the economy than helpful in the short run. However, it would help promote serious long-term economic growth once businesses become accustomed to paying the fee for profits.

Tax has an important role in the development of corporations. Corporations pay taxes to incentivize investment and keep transparency to meet global standards which would provide a stable society rife with business.


bottom of page