The UAE introduces its first-ever corporate taxes, set to start in 2023

A general tour of downtown Dubai, United Arab Emirates, December 8, 2021.

Satish Kumar | Reuters

DUBAI, United Arab Emirates – The United Arab Emirates will impose a federal corporate tax on corporate profits for the first time, the Ministry of Finance announced on Monday.

The news represents a marked shift for a country that has long attracted companies from around the world thanks to its status as a tax-free trading center. Businesses will be taxable from June 1, 2023.

The country’s statutory tax rate will be 9% for taxable income exceeding 375,000 dirhams in the United Arab Emirates ($ 102,000), and zero for taxable income up to this amount “to support small businesses and start-ups,” the ministry said, adding that “The UAE corporate tax system will be among the most competitive in the world.”

Individuals will still not be taxed on their income from employment, real estate, equity investments or other personal income not related to a trade or business in the UAE, the ministry said. The tax will also not be applied to foreign investors who do not do business in the country.

As to what is profit, corporation tax will apply to “the adjusted net accounting result” of the company.

Free zone companies, meanwhile, – thousands of which exist in the country – can “continue to benefit from corporation tax incentives” as long as they “meet all the necessary requirements,” the ministry said without elaborating. Companies within the UAE’s many free zones have long benefited from zero taxes and full foreign ownership, among other benefits.

“The United Arab Emirates’ corporate tax system is designed to incorporate best practices globally and minimize the compliance burden on businesses,” the state news agency WAM wrote.

“Corporation tax is payable on the profits of UAE companies as reported in their accounts prepared in accordance with internationally acceptable accounting standards, with minimal exceptions and adjustments. The corporation tax will apply to all companies and commercial activities, except for the extraction of natural resources, which remain subject to corporate taxation at the emirate level. “

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