Corporate Tax in Ras Al Khaimah: Key Insights for Investors and Entrepreneurs

The introduction of corporate tax in the United Arab Emirates (UAE) marks a significant change in the country's business environment. As part of its efforts to align with global tax standards and diversify its economy, Ras Al Khaimah (RAK), a leading business hub in the UAE, has been included in this new corporate tax regime. Effective from June 1, 2023, under Federal Decree-Law No. 47 of 2022, businesses operating in the UAE must register for corporate tax with the Federal Tax Authority (FTA). This new tax law applies to business activities in the UAE, including Dubai, Abu Dhabi, and other emirates, with a standard corporate tax rate of 9% on profits exceeding AED 375,000. However, businesses that qualify as a qualifying free zone person can benefit from a 0% tax rate on qualifying income.

The UAE corporate tax law requires businesses to obtain a corporate tax registration to ensure compliance with the tax legislation. It also mandates that all UAE companies and businesses set-up in the UAE comply with corporate tax filing and meet tax period deadlines. As persons subject to corporate tax, businesses must pay corporate tax based on their taxable income, which includes withholding tax for cross-border transactions, in accordance with the regulations set by the tax authority.

What is Corporate Tax in Ras Al Khaimah?

Corporate tax in Ras Al Khaimah is a tax levied on the corporate income of businesses operating within the emirate. Effective from June 1, 2023, the UAE's corporate tax law introduces a 9% tax rate on profits exceeding AED 375,000. This tax applies to all businesses across the UAE, with exceptions for those operating within designated free zones. Free zone companies continue to benefit from tax exemptions for a specified period, making it an attractive option for international investors.

Key Features of Corporate Tax in Ras Al Khaimah:

→ Tax Rate: 9% on profits exceeding AED 375,000.

→ Exemption for Free Zone Entities: Companies operating in RAKEZ (Ras Al Khaimah Economic Zone) can benefit from tax exemptions ranging from 15 to 50 years, depending on the business activity.

→ Global Alignment: The UAE’s corporate tax law aligns with international tax standards like the OECD’s BEPS (Base Erosion and Profit Shifting) framework, ensuring the country’s tax regime meets global transparency and compliance requirements.

Tax incentives: Ras al-Khaimah Free Trade Zone

Ras Al Khaimah (RAK) Free Trade Zone offers several significant tax incentives to businesses, making it an attractive destination for investment. Companies established in RAK Free Zone can benefit from 0% corporate income tax, 100% foreign ownership, 100% profit and capital repatriation, and no personal income tax. In addition, businesses enjoy exemptions from import and export duties, which further reduce operating costs. Free zone companies also benefit from a simplified registration and licensing process and access to a strategic location that connects Europe, Asia, and Africa, providing easy access to international markets. However, with the introduction of the UAE corporate tax law in 2023, free zone companies may now be subject to the 9% corporate tax rate on profits exceeding AED 375,000. To maintain a 0% tax rate, businesses must meet specific conditions, including qualifying income and substance requirements, and comply with transfer pricing rules. 

What is corporate tax services?

Corporate tax services refer to a range of professional services provided to businesses to help them comply with corporate tax regulations, optimize their tax positions, and manage their tax obligations effectively. These services are typically offered by accounting firms, tax consultants, and financial advisors, and they cover various aspects of corporate taxation. Here’s a breakdown of what corporate tax services generally include:

1. Tax Planning and Strategy

→ Corporate tax planning involves developing strategies to minimize a business’s overall tax liability. This could include structuring the business in a tax-efficient manner, using tax credits, deductions, exemptions, or tax treaties, and planning the timing of income and expenses to optimize the company’s tax position.

→ Professionals assist in planning for the most tax-efficient business models, whether domestic or international.

2. Tax Compliance and Filing

→ Corporate tax services ensure that businesses comply with local and international tax laws. This includes filing corporate tax returns, submitting necessary documents to the tax authorities, and ensuring that all required taxes (such as income tax, VAT, or excise tax) are correctly calculated and paid.

→ Service providers assist in preparing and submitting annual tax returns, financial reports, and any statutory filings required by the relevant tax authorities.

3. Corporate Tax Registration

→ Businesses need to register for corporate tax with the tax authorities, and tax consultants help companies through this process by preparing and submitting the necessary documentation.

→ Corporate tax registration includes obtaining a tax registration number (TRN) and ensuring the company is set up correctly for tax purposes.

4. Tax Exemption and Deductions

→ Tax experts help businesses understand the exemptions and deductions available to them. This could include exemptions for businesses operating in free zones, deductions for operational costs, or special relief programs.They assist in ensuring that businesses maximize their available tax incentives while maintaining compliance with regulations.

5. International Taxation

→ For businesses with international operations or cross-border transactions, corporate tax services often include transfer pricing, advising on tax treaties, and managing double taxation risks.

→ Tax professionals help navigate the complex rules related to foreign income, foreign tax credits, and compliance with international standards such as the OECD’s BEPS framework.

6. Audit and Tax Dispute Resolution

→ Some corporate tax services include helping businesses handle tax audits and disputes with tax authorities. This could involve representing the company in front of tax authorities, reviewing tax assessments, and resolving any issues related to penalties, late filings, or tax disputes.

7. Tax Advisory Services

→ Tax advisors provide ongoing advice on changing tax laws, regulations, and policies. They help businesses understand new tax laws and their implications, especially when there are updates to tax codes or the introduction of new taxes (such as corporate tax).

→ They also offer advice on specific business transactions, mergers, acquisitions, restructuring, and other corporate actions that have tax implications.

8. Transfer Pricing Services

→ For multinational companies, transfer pricing services are critical. This involves setting appropriate prices for goods and services exchanged between the company’s affiliates in different countries. The aim is to ensure that transfer pricing is compliant with tax laws in different jurisdictions and that it minimizes the risk of tax penalties.

9. Employee Taxation and Payroll Compliance

→ Tax services often extend to handling payroll taxes and ensuring compliance with regulations regarding employee salaries, benefits, and withholdings. They can advise on employee compensation plans, bonus structures, and tax filings related to employees.

Is dubai tax free for business?

Dubai is not entirely tax-free for businesses, but it offers very favorable tax conditions. The UAE introduced a corporate tax regime starting June 1, 2023, under which profits exceeding AED 375,000 are taxed at a 9% rate, while profits below this threshold are subject to a 0% tax rate. However, businesses operating in free zones in Dubai can benefit from zero tax on qualifying income, provided they meet certain requirements such as maintaining adequate substance and engaging in eligible business activities. Additionally, Dubai does not impose personal income tax, which makes it a highly attractive location for both businesses and individuals. Although businesses in Dubai enjoy favorable tax rates, they are still required to register for corporate tax, file tax returns, and comply with the UAE corporate tax law. Therefore, while Dubai offers significant tax advantages, businesses must adhere to the regulatory framework to maintain their eligibility for tax exemptions and incentives.

How Does Corporate Tax Impact Businesses in Ras Al Khaimah?

The introduction of corporate tax brings both challenges and opportunities for businesses in Ras Al Khaimah. While the tax framework is designed to align with global tax practices, it also ensures that Ras Al Khaimah remains an attractive business destination, especially with the continued tax exemptions for free zone businesses.

Benefits for Businesses in Ras Al Khaimah:

→ Tax Exemptions for Free Zone Companies: Free zone companies are eligible for tax-free operations for a period ranging from 15 to 50 years.

→ 100% Foreign Ownership: Foreign investors can own 100% of their businesses, enabling full control over operations.

→ No Customs Duty: There are no customs duties on goods that are re-exported from the UAE, providing a seamless experience for international trade.

Businesses that exceed the profit threshold of AED 375,000 will be subject to a 9% corporate tax. Therefore, businesses need to register for corporate tax and comply with filing and reporting requirements.

How much is corporate tax registration in the UAE?

Registering for corporate tax in the UAE is free of charge — there is no government fee to submit the registration application via the Federal Tax Authority (FTA). 
However, businesses may incur service or advisory fees from external consultants or service providers, and some firms quote internal “registration” bundles starting from around AED 1,000 when including associated services. 

What Business Activities are Affected by Corporate Tax in Ras Al Khaimah?

Corporate tax in Ras Al Khaimah applies to a broad range of business activities. These include, but are not limited to:

→ Commercial Activities: Import/export, retail, e-commerce, and trading.

→ Industrial Activities: Manufacturing, production, logistics, and related sectors.

→ Professional Services: Consultancy, legal, advisory, and other service-based businesses.

→ Freelancer Activities: Sole-proprietor businesses in various fields.

Each business type will need to review its business licence to determine if its activities are subject to corporate tax. Fortunately, businesses operating within RAKEZ benefit from clear guidelines and tax exemptions depending on their business activity.

What Are the Key Tax Exemptions in Ras Al Khaimah?

Ras Al Khaimah continues to be an attractive destination for businesses due to the tax exemptions available, especially for companies located in RAKEZ Free Zones. These exemptions are designed to foster foreign investment and business formation within the emirate.

Free Zone Tax Benefits:

→ Zero Income/Corporate Tax: Companies in RAKEZ Free Zones are exempt from corporate tax for a period that can range from 15 to 50 years.

→ 100% Profit Repatriation: Companies are allowed to transfer 100% of their profits back to their home country.

→ No Customs Duty: Businesses can re-export goods from the UAE without paying customs duty, which facilitates global trade.

Free zone companies also enjoy the flexibility of a single business licence that allows them to engage in multiple activities, simplifying business operations and minimizing costs.

How to Register for Corporate Tax in Ras Al Khaimah?

The process for registering for corporate tax in Ras Al Khaimah is simple yet crucial for compliance. Businesses must register with RAKEZ or the relevant authorities, depending on their business structure and activities.

Steps for Corporate Tax Registration:

1. Apply for Tax Registration: Submit your business details to RAKEZ or the relevant authority to begin the process.

2. Obtain a Tax Registration Number: Upon registration, you will receive a tax registration number.

3. File Annual Tax Returns: Submit your annual tax return detailing your taxable income and taxable profits exceeding AED 375,000.

4. Maintain Financial Records: Ensure proper financial reporting and maintain records of income, expenses, and financial transactions to meet compliance requirements.

How do UAE businesses register for corporate tax?

To register for corporate tax in the UAE, businesses must begin by creating an account or logging into the EmaraTax portal, which is managed by the Federal Tax Authority (FTA). Once logged in, businesses need to select the “Taxable Person” entity and choose “Register for Corporate Tax”. During the registration process, the business will provide essential details such as the entity name, trade licence number, business activities, and financial year. It is also required to upload supporting documents, including the trade licence, incorporation certificate, the Memorandum and Articles of Association (if applicable), passports or IDs of stakeholders, and proof of address. After submission, the FTA will review the application and issue a Tax Registration Number (TRN) or Corporate Tax registration number once approved. It’s important to note that businesses must meet the registration deadline, which is typically based on the date of licence issuance or when they became liable for corporate tax. Late registration may result in penalties, such as fines starting at AED 10,000. Businesses must also ensure they maintain accurate financial records for tax reporting, filing, and compliance purposes, as the FTA may request further documentation or audits.

Highlight of the current UAE corporate tax system

The UAE’s corporate tax system, effective from June 1, 2023, imposes a 9% tax on profits exceeding AED 375,000, with profits below that threshold taxed at 0%. Free zone companies can benefit from a 0% tax rate on qualifying income, provided they meet specific conditions. From January 1, 2025, a Domestic Minimum Top‑Up Tax (DMTT) of 15% will apply to large multinational enterprises. Businesses must register, file annual tax returns, and maintain financial records to comply with new regulations. Certain entities, like government bodies and extractive industries, may be exempt. The system supports investment by offering low tax rates and clear compliance rules, especially in regions like Ras Al Khaimah.

What Are the Penalties for Non-Compliance with Corporate Tax Laws?

Failure to comply with corporate tax laws in Ras Al Khaimah can result in severe penalties, including fines for:

→ Late Registration: Not registering for corporate tax within the designated period.

→ Incorrect Filings: Errors or omissions in tax returns or failure to report correct taxable income.

→ Late Payments: Failure to pay the tax due within the prescribed timeframe.

Businesses must ensure they adhere to tax deadlines and maintain accurate financial reports to avoid penalties.

Who Qualifies for Exemption from UAE Corporate Tax?

In the UAE, several categories of businesses and entities qualify for exemptions from the corporate tax or are subject to special tax rates. Government entities and certain public benefit organizations are automatically exempt from the corporate tax, as they are either government-controlled or mandated to operate for public good. Similarly, businesses engaged in extractive industries (such as oil and gas production) or those operating under certain Emirate-level taxes rather than the federal corporate tax law may also be exempt. Additionally, businesses that qualify as free zone entities can benefit from 0% corporate tax rates on their qualifying income, provided they meet specific conditions, such as maintaining adequate substance within the free zone (e.g., physical presence, employees, and operational activities). These exemptions are crucial for encouraging foreign investment and supporting businesses in sectors such as technology, manufacturing, and consultancy.

How Young & Right Help You with Corporate Tax in Ras Al Khaimah

At Young & Right, we specialize in helping businesses navigate the complexities of corporate tax in Ras Al Khaimah. Our corporate tax services are tailored to meet the needs of all types of businesses, whether you are a startup, a freelancer, or a large corporation. With our expert knowledge of the UAE corporate tax system, we ensure that your business remains compliant with corporate tax laws while maximizing the available tax exemptions and deductions.

Our Comprehensive Corporate Tax Services Include:

1. Corporate Tax Registration
   We assist businesses in Ras Al Khaimah with the corporate tax registration process, ensuring that your company receives its corporate tax registration number and complies with federal tax authority (FTA) requirements. Whether you are setting up a new business or expanding your operations, we guide you through every step.

2. Tax Filings & Returns
   Our team helps ensure that your corporate tax return is filed accurately and on time, including all qualifying income and eligible deductions. We work with businesses to prepare their annual tax filings, making sure they adhere to UAE corporate tax regulations and avoid penalties for late payments or incorrect filings.

3. Tax Exemptions & Deductions
   For businesses operating in free zones, we identify the available tax exemptions and help you leverage these benefits. Our team ensures that free zone companies maximize their tax-free period, taking full advantage of 100% foreign ownership and profit repatriation without the burden of corporate tax.

4. Ongoing Compliance & Support
   Corporate tax compliance is an ongoing process. We provide continuous support to ensure your business stays in line with any updates or changes in the tax law. With the new corporate tax regime in place, we help you maintain accurate financial records and ensure that you remain compliant with evolving tax obligations.

5. Expert Advice on Qualifying Income and Exemptions
   With our in-depth understanding of taxable income, corporate income tax, and the new corporate tax framework, we provide strategic advice on how to structure your business activities to minimize tax liabilities. We also help businesses understand which activities qualify for tax exemptions under RAKEZ and other relevant zones.

6. Tax Planning & Strategy
   Our expert consultants provide tax planning strategies that align with your business goals. Whether you are focused on expansion, investment in new projects, or managing corporate tax obligations, we tailor our solutions to help optimize your tax position and ensure long-term financial success.

Conclusion

The introduction of corporate tax in Ras Al Khaimah presents both challenges and opportunities for businesses operating in the UAE. Understanding the corporate tax rate of 9%, available exemptions, and the registration and filing requirements is crucial for compliance and long-term success. Whether you are a startup, freelancer, or a large corporation, it is vital to have a clear understanding of the UAE CT system to ensure that your business remains compliant and efficient.

As of June 1, 2023, the UAE has implemented this tax regime, and companies must register for corporate tax to be in compliance with UAE tax laws. This includes business activities conducted within the UAE, whether in Dubai, Abu Dhabi, or Ras Al Khaimah, and companies must file their tax returns with the Federal Tax Authority. Businesses in UAE free zones can still benefit from a 0% corporate tax rate, provided they meet the required conditions for being a qualifying free zone person.

To ensure your business is in full compliance with tax authority and Abu Dhabi regulations, it is important to understand all the requirements for corporate tax registration and how to handle corporate tax filing on time. As the UAE offers a competitive tax regime, companies that set up a business within the country have access to various advantages, but they must adhere to tax laws to maintain their eligibility for tax incentives and exemptions.

At Young & Right, we offer expert guidance on corporate tax registration, filing, and ongoing compliance to help your business navigate the evolving tax landscape with ease. We ensure that your business is set up for success, fully compliant, and ready to take advantage of the opportunities provided by the UAE corporate tax system in 2024 and beyond.