The UAE’s corporate tax regime will be among the most competitive worldwide, featuring a standard statutory tax rate of 9 percent and a tax rate of 0 percent for taxable profits up to AED375,000. The Ministry of Finance announced that the UAE will introduce a federal corporate tax on business profits that will be effective from the beginning of the first financial year beginning on or after 1st June 2023.
In the UAE, corporate tax is payable on the profits of businesses as reported in their financial statements prepared following internationally accepted accounting standards, with minimal exceptions and adjustments. The corporate tax will apply to all businesses and commercial activities, except for the extraction of natural resources, which will remain subject to emirate-level corporate taxation.
UAE corporate tax laws were created to incorporate global best practices and minimize business compliance burdens. The corporate tax regime in the UAE is considered one of the most competitive in the world,
featuring a standard corporate tax rate of 9 percent and a 0 percent tax rate for taxable profits up to AED 375,000.
There will be no taxation of personal income from employment, real estate, other investments, or any other income earned by individuals that do not arise from commercial activity, a licensed business, or otherwise permitted in the United Arab Emirates.
UAE plays a pivotal role in helping businesses grow locally and globally. The UAE’s competitive corporate tax regime, coupled with its extensive network of double taxation treaties, will cement the UAE’s position as a world-leading hub for business and investment. Moreover, the UAE reaffirms its commitment to maintaining the highest levels of tax transparency and preventing harmful tax practices. It will enable the UAE to address the challenges associated with the digitalization of the global economy and other remaining BEPS [Base Erosion and Profit Shifting] concerns, in addition to executing its support for the introduction of a global minimum tax rate by applying a different corporate tax rate on large multinational corporations that are in compliance with the above initiative.
Recognizing the importance of free zones to UAE economic development and competitiveness, the UAE corporate tax regime will continue to provide corporate tax incentives to free zone businesses that comply with all regulatory requirements and do not transact with mainland UAE.
UAE will also not impose withholding taxes on domestic and cross-border payments, nor will it impose corporate tariffs on foreign investors who do not engage in business in the country. Businesses in the UAE will not be liable for paying tax on capital gains and dividends received from their qualifying shareholdings, and foreign taxes can be credited against UAE corporate tax.
UAE corporate tax rules will have generous loss utilization provisions. They will permit UAE groups to be taxed as a single entity or take advantage of a group relief regime in connection with intragroup transactions and restructurings. The tax regime will minimize the compliance burden for businesses that prepare and maintain adequate financial statements. Businesses will only be required to file one corporate tax return each financial year, and they will not be required to make advance tax payments or prepare provisional tax returns.
UAE corporate tax rules will have generous loss utilization provisions. They will permit UAE groups to be taxed as a single entity or take advantage of a group relief regime in connection with intragroup transactions and restructurings. The tax regime will minimize the compliance burden for businesses that prepare and maintain adequate financial statements. Businesses will only be required to file one corporate tax return each financial year, and they will not be required to make advance tax payments or prepare provisional tax returns.
UAE businesses will have ample time to prepare for the introduction of corporate tax in the UAE. The UAE Ministry of Finance will release further information on the UAE corporate tax regime towards the middle of the year to assist businesses in becoming fully compliant.