The United Arab Emirates (UAE) remains a prime destination for foreign companies due to its strategic location, business-friendly policies, and tax advantages. However, with the introduction of the new corporate tax regime, foreign companies must now navigate the complexities of corporate tax liability on immovable property and real estate. This blog post provides valuable insights and guidance on CT liability for foreign companies operating in the UAE.
Corporate Tax Liability on Immovable Property and Real Estate
The UAE’s corporate tax landscape significantly changed with the Ministry of Finance’s recent clarification. Foreign businesses and non-resident juridical entities are now subject to a 9% corporate tax on income generated from immovable property and real estate in the UAE. This move aligns the UAE with international tax practices while maintaining its appeal as a global investment hub.
Scope of Taxation:
The scope extends to both immovable properties used in business operations and those held for investment. This means all businesses earning income from UAE real estate will be subject to the new corporate tax.
Effective Date and Registration Requirements:
Effective from June 1, 2023, all businesses subject to the tax must register with the Federal Tax Authority (FTA) within one year of this date. Failure to register may result in penalties.
Calculation of Taxable Income:
Corporate tax will be calculated on a net income basis, allowing businesses to deduct relevant expenses from their gross income before determining their tax liability. This ensures that businesses are taxed on profits, not total revenue.
Exemptions:
Certain exemptions apply. For instance, income from real estate investments owned by foreign or UAE resident individuals is generally exempt if it doesn’t involve a licensed business activity. Additionally, real estate investment trusts and qualifying investment funds are exempt from the tax.
Uses and Effects:
– Aligning with International Tax Practices: The new tax aligns the UAE with global standards, enhancing its attractiveness to foreign investors.
– Fostering Fiscal Discipline: Ensures businesses in the UAE pay their fair share of taxes.
– Creating a Level Playing Field: Ensures fairness for all businesses, whether foreign or domestic.
– Generating Revenue: Provides additional funds for important government projects and programs.
Conclusion
The introduction of the new corporate tax on real estate income marks a significant development for the UAE economy. This move underscores the UAE’s commitment to international tax standards and adaptability to changing economic conditions. The new tax ensures a level playing field for both domestic and foreign businesses. To stay compliant with UAE’s corporate tax regulations, foreign entities can benefit from professional tax consultants like Unicorn Global Solutions.
Unicorn Global Solutions at Your Service
Unicorn Global Solutions is a leading accounting and advisory firm in the UAE, offering comprehensive support for businesses navigating the new corporate tax landscape. Our services include:
– Registration with the Federal Tax Authority (FTA)
– Calculating Taxable Income
– Filing Tax Returns
– Complying with Tax Laws
At Unicorn Global Solutions, we simplify the process for you. Unicorn Global Solutions is here to help! Text us on whatsApp or call us today .
