UAE issues corporate tax law

The UAE has issued a federal corporate tax law on Friday, that will impose a standard rate of 9 per cent on taxable profits exceeding Dhs375,000.

Profits up to and including the aforementioned threshold will be taxed at a zero percent rate to support small businesses and startups.

Businesses will become subject to the Corporate Tax Law, which will levy a standard tax rate of 9% for taxable business profits exceeding AED 375,000, from the beginning of their first financial year starting on or after 1 June 2023https://t.co/ezraMp36V8#CorporateTax #UAECT pic.twitter.com/KVQgc5CDIT

— وزارة المالية | الإمارات (@MOFUAE) December 9, 2022

The Federal Decree-Law No. 47 of 2022 on Taxation of Corporations and Businesses, will see businesses become subject to corporate tax from the beginning of their first financial year that starts on or after June 1, 2023.

“The introduction of corporate tax is intended to help the UAE achieve its strategic objectives and accelerate its development and transformation,” the UAE’s finance ministry said.

The Ministry of Finance has confirmed that the Federal Decree-Law on #CorporateTax is an important milestone in building an integrated tax regime that supports the strategic objectives of the UAE and enhances its global economic competitivenesshttps://t.co/ezraMp36V8#UAE

— وزارة المالية | الإمارات (@MOFUAE) December 9, 2022

“The certainty of a competitive corporate tax regime that adheres to international standards, together with the UAE’s extensive network of double tax treaties, will cement the UAE’s position as a leading jurisdiction for business and investment,” it added.

The corporate tax law reflects the UAE’s support for the OECD Inclusive Framework on Base Erosion and Profit Shifting in its commitments to introducing a global minimum tax for multinationals, enhancing tax transparency and preventing harmful tax practices, official news agency WAM reported.

Natural resource extraction activities in the country are exempt from the tax regime, but remain subject to existing local emirate-level taxation. Other exemptions are available to government entities, pension funds, investment funds and public benefit organisations.

The existing free zone entities will also be eligible to benefit from a zero per cent corporate tax rate on qualifying income. Under the provisions of the law, corporate tax will not be applied to salaries or other personal income from employment, whether it is earned from work in the government, semi-governmental or private sector.

Interest and other personal income earned from bank deposits or savings programmes are also not subject to corporate tax, as well as investment in real estate by individuals in their personal capacity.

The Federal Tax Authority will be responsible for the administration, collection, and enforcement of the corporate tax law.