UAE corporate tax will be applicable to businesses from the beginning of their first financial year that starts on or after June 1, 2023.
UAE corporate tax regime incorporates best practices globally and minimizes compliance burdens.
UAE businesses will be liable for corporate tax on their profits as reported in their financial statements prepared according to internationally accepted accounting standards, with a few exceptions and adjustments.
Taxation of commercial activities and businesses
All commercial activities and businesses will be subject to the corporate tax, with the exception of the extraction of natural resources, which will remain taxable at the Emirate level.
The UAE corporate tax regime will be competitive, with a standard statutory tax rate of 9 percent and a 0 percent tax rate for taxable profits up to Dh375,000 to encourage small businesses and startups.
Is taxation applicable to individuals?
There will be no corporate tax imposed on personal income derived from employment, real estate, and other investments, or on any other form of income earned by individuals that is not derived from a business or other form of commercial activity licensed or otherwise permitted by the UAE government.
“As a leading jurisdiction for innovation and investment, the UAE plays a pivotal role in helping businesses grow, locally and globally. The certainty of a competitive and best in class corporate tax regime, together with the UAE’s extensive double tax treaty network, will cement the UAE’s position as a world-leading hub for business and investment”, said Younis Haji Al Khoori, Undersecretary of the Ministry of Finance.
Younis Haji Al Khoori further adds that “with the introduction of corporate tax, the UAE reaffirms its commitment to meeting international standards for tax transparency and preventing harmful tax practices. The regime will pave the way for the UAE to address the challenges arising from the digitalisation of the global economy and the other remaining BEPS [Base Erosion and Profit Shifting] concerns, and execute its support for the introduction of a global minimum tax rate by applying a different corporate tax rate to large multinationals that meet specific criteria set with reference to the above initiative.”
Corporate tax incentives
As a result of the contribution made by free zones to the UAE’s economy and competitiveness, the UAE corporate tax regime will continue to offer corporate tax incentives to free zone businesses that meet all regulatory requirements and do not conduct business with mainland UAE.
In recognition of the UAE’s position as a global financial center and international business hub, the UAE will not impose withholding taxes on domestic and cross-border payments, nor subject foreign investors who do not transact business in the UAE to corporate taxes.