UAE to introduce new 9 percent corporate tax

  DUBAI – The UAE will introduce a federal corporate tax on business profits that will be effective for financial years starting on or after June 1, 2023, according to the Ministry of Finance. Corporate tax will be payable on the profits of UAE businesses as reported in their financial statements prepared in accordance with internationally acceptable accounting standards. 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. The standard tatutory tax rate will be 9 percent, but businesses that don’t make profits of more than Dh375,000 will not be taxed as part of the UAE’s support to small businesses and startups. Personal income from employment, real estate and other investments will also not be subject to corporate tax. There will also be no corporate tax on any other income earned by individuals that does not arise from a business or other form of commercial activity licensed or otherwise permitted to be undertaken in the UAE. Younis Haji Al Khoori, Undersecretary of the Ministry of Finance, said the introduction of corporate tax reaffirms the UAE’s “commitment to meeting international standards for tax transparency and preventing harmful tax practices”. For free zones, the UAE will continue to honour corporate tax incentives currently being offered to free zone businesses that comply with all regulatory requirements and that do not conduct business with mainland UAE. The UAE will also not impose withholding taxes on domestic and cross border payments. Foreign investors who do not carry on business in the UAE will not be subject to corporate tax. As an international headquarter location, a UAE business will be exempt from paying tax on capital gains and dividends received from its qualifying shareholdings, and foreign taxes will be allowed to be credited against UAE corporate tax payable. The UAE corporate tax regime will have generous loss utilisation rules and will allow UAE groups to be taxed as a single entity or to apply group relief in respect of losses and intragroup transactions and restructurings. The UAE corporate tax regime will ensure the compliance burden is kept to a minimum for businesses that prepare and maintain adequate financial statements. Businesses will only need to file one corporate tax return each financial year and will not be required to make advance tax payments or prepare provisional tax returns. Transfer pricing and documentation requirements will apply to UAE businesses with reference to the OECD Transfer Pricing Guidelines. UAE businesses will be given ample time to prepare for the introduction of corporate tax in the UAE. The UAE Ministry of Finance plans to issue further information on the UAE corporate tax regime toward the middle of the year to help businesses get ready and be fully compliant. ICA/WAM/Expat Media
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