Media ININ Economy We Trust
The Council of Ministers has officially determined the amount of annual income subject to corporate tax, whereby the part of the taxable income belonging to the taxable person that does not exceed the amount of 375 thousand dirhams is subject to corporate tax at the rate of 0% in the tax period, regardless of whether the taxable person engages in several businesses or business activity in that period. tax period.
The decision also stipulates that the taxable income of the taxable person that exceeds the amount of 375 thousand dirhams is subject to corporate tax at a rate of 9% in the relevant tax period.
And according to Federal Law No. (47) of 2022 regarding corporate and business tax, business tax is applied to companies operating in the country, from fiscal years beginning on or after June 1, 2023. The tax rate for a company whose annual income does not exceed 375 One thousand dirhams (to be determined by a decision of the Council of Ministers) will be 0%, while it will be imposed at 9% on companies whose income exceeds 375 thousand dirhams, 0% on qualified income, and 9% on taxable income that does not meet the definition of qualified income.
How do you count?
If a business generates taxable income of AED 1 million, the corporate tax payable will be calculated, thus, taxable income not exceeding AED 375,000, at 0%: 375,000 x 0% = 0 AED.
And in the event that the taxable income exceeds 375 thousand dirhams, and this amount will be confirmed by a decision issued by the Council of Ministers, at a rate of 9%: (1,000,000-375,000) = 56,250 dirhams, and the corporate tax liability for the tax period will be 0 + 56,250 = 56,250 dirhams. Reduce the final tax payable by deducting any available tax credit.
business separation
And if it appears to the Federal Tax Authority that one or more persons have separated their business or business activity in a fictitious manner, and the taxable income pertaining to their entire business or business activity is subject to corporate tax at a rate of 0% in the tax period on an amount exceeding 375 thousand dirhams, then this is considered an arrangement to obtain an advantage Relevant to corporate tax according to Clause 1 of Article 50 of the Corporate Tax Law.
For the purpose of the Federal Tax Authority verifying whether two or more persons have formally separated their business or business activity, it must consider whether the arrangement has been entered into for a legitimate business purpose, and whether the persons carry on substantially the same business or business activity. Taking into account all relevant facts and circumstances including but not limited to their financial, economic and organizational ties.
