How Dubai’s Corporate Tax Impacts Today’s Construction Firms

You own a construction company in Dubai and most likely you have heard a lot about the new corporate tax regulations. Federal corporate tax is now levied in the UAE and project pricing, budgeting and strategy for the first time now include tax directly.

That’s why many construction businesses are turning to Push Digits, a trusted accounting and audit firm in the UAE, to stay compliant and optimize their tax position.

And what exactly does this have to do with your construction business? Let’s break it down:

 Updated Corporate Tax of Dubai: The Basics

Here is what you need to know about the UAE Corporate Tax Legislation:

■ Tax Rates

• 0 percent on the first 375,000 dirhams of taxable income.
• 9 percent on part of taxable income greater than 375,000 dirhams

This essentially means you are not required to pay 9 percent on all your profit; you pay 9 percent on the portion of taxable income that is more than 375,000 dirhams.

Why the change?

• To make the UAE compliant with the international standards of taxation.
• To increase transparency.
• To promote more robust as well as more precise accounting practices.

So what should companies do?

• Reassess financial planning: Look at budgets and profit estimates.
• Increase compliance: Accuracy in reporting is now a basic requirement.
• Redesign of contracts: International projects and partnership projects in particular.

What is Changing for the Construction Companies?

There are direct implications on the construction sector due to the characteristics of projects, financing and subcontracting.

1. Project Financing and International Deals

The new regulations involve requirements of transfer pricing.

When you have to do business with related parties or foreign organizations, you have to record:

• how prices were set
• how profits are allocated
• whether the foreign presence gives rise to a Permanent Establishment (PE)

2. Impact on Bidding & Pricing

At a rate that is fixed at 9 percent beyond the 375,000 dirhams threshold:

• Profit margins will change.
• Bids may need changes.
• Tax planning has to be incorporated in competitive pricing.

3. Improved Recordkeeping

Construction companies are required to maintain:

• Accurate invoices
• Expense breakdowns
• Proof of contract
• Project Documentation
• Transfer pricing documentation (if applicable)

Maintaining accurate, digital records is now an obligation.

Important Note for Free Zone Construction Companies

If you operate in a Free Zone, please remember that:

• You may be a Qualifying Free Zone Person (QFZP) and enjoy 0 percent tax on qualifying income.
• BUT:
• You have to fulfill requirements (substance, audited financial statements, etc.).
• Non-qualifying or mainland income is taxed at 9 percent.
• There are de minimis limits on how much non-qualifying income you can earn.

You are not automatically tax-free just by being in a Free Zone.

Ways Construction Firms Can Change

1. Rethink Tax Planning

Look into:

• Available exemptions
• Foreign tax credits
• Group relief
• Free Zone incentives (if applicable)

2. Update Forecasting

Prepare financial structures that encompass:

• Tax on profit margins.
• Large project scenario planning.
• Cash flow impacts.

3. Make Tax a Part of Project Strategy

Before starting any project:

• Review contract structure.
• Determine whether subcontractor transactions are tax triggering.
• Take into account cross-border tax implications.

4. Get Professional Help

Tax advisors assist to ensure:

• Compliance.
• Accurate filings.
• Good transfer pricing reporting.

Construction work is not easy; it is worth getting professional advice.

Compliance: Challenges and Opportunities

Challenges

• More comprehensive recordkeeping
• Books need to be audit-ready
• Staff training related to new rules

Opportunities

• Better compliance increases credibility with investors and partners
• Better financial reporting can uncover extra hidden cost savings
• Digital records will create efficiency across projects

Digital Transformation: More Significant Than Ever

The construction companies that use the tools of the digital world will be the market leaders because they can achieve:

• Streamlined operations.
• Compliance processes that are automated.
• Greater financial transparency.
• Faster decision-making.

Digitalization is not a choice anymore; it is a competitive advantage.

Final Thoughts

The new corporate tax laws in Dubai are transforming the construction industry, but the transformation should not slow your growth.

With:

• smart planning,
• stronger compliance,
• structuring of strategic projects and
• investment in digital tools,

Your construction business can not only adapt but also prosper.

Stay proactive and stay informed and consult the professionals when necessary. You’ve got this!