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corporate tax calculator

Calculate Corporate Tax in 4 Simple Steps:

STEP 1: Select your Company Type from the dropdown menu.
STEP 2: Enter the Expected Revenue/Turnover for the tax period
STEP 3: Enter the Expected Profit for the tax period.
STEP 4: Click 'Calculate' to get your corporate tax result instantly.

Navigating Dubai's Corporate Tax with the UAE Corporate Tax Calculator

With the introduction of corporate tax in the UAE, businesses must adapt to new financial obligations. As a country long recognized for its tax-free environment, the implementation of corporate tax marks a significant shift, especially in Dubai, the business hub of the UAE. To assist companies in navigating this new landscape, the UAE Corporate Tax Calculator offers a reliable solution for calculating tax liabilities with precision.

On December 9, 2022, Federal Tax Authority (the FTA) issued Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Business (the CT Law) and In July 2024, the Federal Tax Authority (FTA) released comprehensive guidance on the computation of taxable income under the UAE’s Corporate Tax regime. According to this law, businesses will become subject to UAE Corporate tax from the beginning of their first financial year that starts on and after 1st June 2023.
 
1. Starting Point: Accounting Income
The calculation of taxable income begins with the accounting income, which is the net profit or loss for the relevant tax period as per the financial statements. These financial statements should be prepared according to International Financial Reporting Standards (IFRS) or IFRS for SMEs. However, businesses with revenue under AED 3 million may opt for the cash basis of accounting.

2. Adjustments to Accounting Income
Once the accounting income is established, several adjustments need to be made in compliance with the Corporate Tax Law. These include:

• Unrealised Gains or Losses: Businesses must decide whether to include unrealised gains or losses in their taxable income. If they opt to exclude these, only realised gains and losses will be considered.
• Exempt Income: Certain types of income, such as dividends and income from foreign permanent establishments, are exempt from corporate tax. Any expenses incurred in generating exempt income cannot be deducted.
• Non-Deductible Expenditures: Some expenses cannot be deducted for tax purposes, including entertainment costs, capital expenditures, and expenses not wholly and exclusively incurred for business purposes.

3. Key Exemptions
The UAE Corporate Tax regime provides several important exemptions:

• Domestic Dividends: Dividends received from other UAE-based entities are exempt from corporate tax.
• Participation Exemption: Dividends and capital gains derived from significant ownership in foreign companies are exempt, provided the ownership exceeds 5% and the foreign entity is subject to corporate tax in its jurisdiction.
• Foreign Permanent Establishment (PE): Resident businesses can elect to exempt income derived from foreign PEs, eliminating the risk of double taxation.

4. Deductible vs. Non-Deductible Expenses
Not all expenses reported in the financial statements are deductible for tax purposes. Deductible expenses must be incurred wholly and exclusively for business purposes. Key categories of deductible expenses include:

• Employment Expenses: Salaries and benefits are generally deductible, provided they are reasonable and arm’s length.
• Interest Expenses: Deductibility of interest is subject to the General Interest Deduction Limitation Rule, which caps deductions based on a percentage of adjusted EBITDA.
• Bad Debts and Provisions: Provisions for bad debts are deductible when they comply with accounting standards.

Non-deductible expenses, such as fines, bribes, and certain capital expenditures, must be added back to the accounting income to determine taxable income.

5. Tax Loss Relief
Businesses can carry forward tax losses to offset future profits. However, there are limitations, such as the restriction that tax losses can only offset up to 75% of taxable income in any given year. Losses can also be transferred to another group company, provided certain conditions are met.

6. Corporate Tax Rates
Once taxable income is calculated, it is subject to the following corporate tax rates:

• 0% on taxable income up to AED 375,000.
• 9% on taxable income exceeding AED 375,000.

For free zone entities, a 0% tax rate applies to qualifying income, with a 9% tax rate applicable to non-qualifying income.

7. Foreign Tax Credits
To prevent double taxation, businesses can claim foreign tax credits on income that has been taxed in foreign jurisdictions. This credit reduces the amount of UAE corporate tax payable but cannot result in a refund.
Computation of taxable income under the UAE’s Corporate Tax regime involves adjusting accounting income according to the specific rules of the Corporate Tax Law. Key adjustments include the exclusion of exempt income, non-deductible expenses, and the application of loss relief. Staying compliant with these guidelines will ensure that businesses in the UAE can meet their corporate tax obligations effectively.
 

Small Business Relief

We have assumed that if the expected revenue/turnover is less than or equal to AED 3 million, the revenue/turnover was also less than AED 3 million in all previous years.

Disclaimer

The above calculation is based on the provisions of law published by the FTA authority. These provisions are subject to frequent changes. Virtual Accountants LLC is not liable for any fines or penalties incurred by the user as a result of using this calculator.