It was perhaps inevitable that following the introduction of 100% foreign ownership, a move to a greater knowledge based economy and many other legislative changes making foreign investment favorable, that a business tax would follow.
Corporation tax is here and registration for all UAE based businesses is mandatory.
The big question is will your business be paying 0% or 9% corporation tax and what should you do now?
Here are the basics that you need to know:
The legislation is lengthy, complex and more detail will be coming out over the next weeks and months in the form of further Cabinet decisions.
Whilst all businesses need to register, the rate of tax to pay depends on whether you have a local or free zone business and a number of other important factors which will determine what types and sources of income will be charged at 0% or 9%.
Everything in legislation is connected and if you go back to the structure of the free zones, you will know that they are designed with some key conditions:
Now, for a free zone entity to maintain 0% corporation tax, it will need to comply with all of the following additional conditions:
As a general matter of planning your free zone business, you should avoid mixing local and international business within the same entity since if the 0% conditions are broken, potentially all of the business profits would be charged to tax at 9%.
Dividend income and capital gains will be taxed at 0% subject to meeting certain conditions in relation to the level of participation of the holding.
Reach out to your OnPro representative for a discussion on how the new regulations impact your business.