The Ministry of Finance of the UAE has announced that the country will introduce a federal corporate tax on business profits effective for financial years starting on or after June 1, 2023.
With a standard statutory tax rate of 9% and a 0% tax rate for taxable profits up to AED 375,000 to support small businesses and startups, the UAE corporate tax regime will be amongst the most competitive in the world.
No corporate tax will apply on personal income from employment, real estate and other investments, or 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.
Recognising the contribution of free zones to the UAE’s economy and competitiveness, the UAE corporate tax regime will continue to honour the 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.
Given the position of the UAE as a global financial centre and an international business hub, 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.
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.
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.
The UAE officials said the country’s corporate tax regime has been designed to incorporate best practices globally and minimise the compliance burden on businesses.
Please feel free to contact us should you require any further information on this or any other tax matter.