The decision begins with defining various terms related to taxation, including the State, Ministry, Authority, Person, Taxable Person, Corporate Tax Law, Taxable Income, Tax Period, Tax Return, Business, and Business Activity.

The first significant provision of the decision focuses on income subject to corporate tax at a 0% rate. Any Taxable Person with a Taxable Income not exceeding AED 375,000 will be subject to zero percent corporate tax, regardless of the number of businesses or business activities they conduct in that Tax Period.

However, the decision warns against artificial separation of business to obtain tax benefits. If it’s proven that multiple Persons have artificially separated their business or business activities, and the total Taxable Income exceeds AED 375,000, it will be considered an arrangement for tax avoidance under Clause 1 of Article 50 of the Corporate Tax Law. The Authority will examine the arrangement’s legitimacy based on commercial purposes and substantial similarity in business operations.

For Taxable Persons with Taxable Income exceeding AED 375,000, the corporate tax rate will be 9% for the relevant Tax Period.

The Minister of Finance has the authority to issue necessary implementing decisions to enforce the provisions of the Cabinet Decision.

The Cabinet Decision No. 116 of 2022 has been published in the Official Gazette and is effective from 15 days after its publication.

The new Cabinet Decision No. 116 of 2022 brings clarity to corporate tax rates and thresholds for businesses in the UAE. With specific income brackets and tax rates defined, businesses can now better plan and manage their tax liabilities. However, it’s essential for businesses to remain compliant with the new regulations and consult with tax advisors to ensure accurate reporting and adherence to tax laws.