UAE Free Zone Corporate Tax regime earns OECD’s ‘non-harmful’ recognition

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The Organisation for Economic Co-operation and Development (OECD) officially recognised the UAE’s Free Zone Corporate Tax (CT) regime as ‘non-harmful’.

This recognition underscores the UAE’s robust tax legislation and its alignment with international tax standards, reported state news agency WAM.

OECD review of worldwide tax regimes

The evaluation of the UAE’s Free Zone Corporate Tax regime was part of the OECD’s comprehensive review of taxation regimes worldwide under the Base Erosion and Profit Shifting (BEPS) Project. The findings, disclosed in the results of the Forum on Harmful Tax Practices (FHTP) October 2023 meeting, confirmed that the UAE’s tax regime aligns with the global initiative to prevent tax avoidance and harmful tax practices.

Mohamed Hadi Al Hussaini, Minister of State for Financial Affairs, highlighted the significance of the OECD rating, stating that it reflects the UAE’s commitment to transparency, and the implementation of best practices in tax policy. He said, “The OECD rating of ‘non-harmful’ is a testament to the UAE’s commitment to transparency, non-harmful taxation, and the implementation of best practices in tax policy. This new status marks a significant milestone in the UAE’s journey towards solidifying its position as a leading global hub for business and investment.”

“It not only enhances our competitiveness on the global stage but also affirms the international community’s confidence in our corporate tax system and provides certainty to investors.”

Al Hussaini added, “Our adherence to international tax standards, coupled with the OECD’s recognition, reinforces our dedication to fostering a sustainable and dynamic economic environment. The Ministry of Finance remains dedicated to further refining our nation’s tax framework, ensuring it supports the country’s vision of economic diversification and development.”

UAE’s Corporate Tax regime

The UAE introduced its nationwide corporate tax regime in 2023 as part of its strategic objectives to accelerate economic development and diversification. The corporate tax regime aims to attract investment, meet international standards for tax transparency, and prevent harmful tax practices.

Under this regime, corporate tax rates are set at zero percent for taxable income up to Dhs375,000 and 9 per cent for taxable income above that threshold.

Furthermore, the article highlights the significance of free zones in the UAE’s economic growth and diversification strategies.

Free zones play a crucial role in attracting foreign direct investment and fostering a favorable business environment.

The Free Zone Corporate Tax regime, offering a zero percent Corporate Tax rate for qualifying businesses, reflects the continued importance of free zones in the UAE’s economic diversification efforts and commitment to international taxation standards.