UAE corporate tax comes into effect this week: Here's all you need to know
The Ministry of Finance stressed that no corporate tax will apply on personal income from employment, real estate and other investments…
The UAE’s Ministry of Finance announced that it will be introducing federal corporate tax for the first time, although rates are set to be among the most competitive in the world.
Applicable to business profits from the beginning of their first financial year that starts on or after June 1, 2023, a standard statutory tax rate of 9% will apply. According to The National, multinationals earning more than 750 million euros in profit will be subject to a 15 per cent rate.
To support small businesses across the emirates, there will be a zero tax rate for taxable profits up to Dh375,000.
The Ministry of Finance to introduce federal corporate tax on business profits that will be effective for financial years starting on or after 1 June 2023. pic.twitter.com/fbn5QiAByj
— وزارة المالية | الإمارات (@MOFUAE) January 31, 2022
The Ministry of Finance stressed that no corporate tax will apply on personal income from employment, real estate and other investments. Any income earned that doesn’t arise from businesses or commercial activity will also be exempt from corporate tax.
“With the introduction of corporate tax, the UAE reaffirms its commitment to meeting international standards for tax transparency and preventing harmful tax practices,” said Younis Haji Al Khoori, Undersecretary of the Ministry of Finance, according to wam. “The introduction of a corporate tax regime will help the UAE achieve its strategic ambitions and incentivise businesses to establish and expand their activities in the UAE,” he added.
There will be some exemptions and conditions. Businesses involved in the “extraction of natural resources” that are already subject to Emirate level corporate taxation will be exempt, and corporate tax incentives currently offered to freezone companies that conduct business outside of mainland UAE will still be honoured. The UAE will not impose withholding taxes on domestic and cross border payments, or subject foreign investors who do not carry on business in the UAE to corporate tax.
To ensure companies are fully prepared for the introduction of corporate tax next year, ample time will be given to prepare, and businesses can expect more detailed information from the ministry by the middle of the year. Further information can also be found on tax.gov.ae