14 July 2024


UAE set to launch its first Corporate TAX in 2023

The United Arab Emirates is implementing a federal corporate tax on business revenues for the very first time in its history. This recent move is to put the nation in sync with other competitive global markets, but on the other hand, it also diminishes the nation’s economic status as a tax haven.

The UAE’s Ministry of Finance announced that a new federal profit tax of 9% will take effect on June 1, 2023. The United Arab Emirates, which includes Abu Dhabi, Dubai, and five other emirates, has been slowly implementing additional taxes in order to broaden revenue away from oil.

The new tax regulation will take effect in June 2023 and will apply to all corporate activity in the UAE, barring natural resource exploitation. When the income of the companies surpasses USD 102,000 or 375,000 dirhams, the tax will be applied. The UAE government is implementing a whole new corporate tax in order to modernize its economy and adhere to international taxation standards. Furthermore, the corporate earnings tax is being implemented as the country’s leadership works to eliminate tax cheating loopholes in global economies. The measure, according to analysts, will enhance the Gulf country’s budgetary system. The UAE claims to have the world’s most competitive tax rate.

Vital Takeaways

Companies in Emirati free zones are exempt from the new corporate tax unless they operate their operations onshore. Oil and gas firms are another exception, as they have their own taxation structures.

In order to help small enterprises and startups, business profits of up to $102,000 will not be taxed. Furthermore, to avoid double taxation, international taxes can be offset against the UAE’s corporation tax. The tax plan would allow UAE company groupings to be taxed as a single entity or to seek assistance in the event of losses or restructuring.

The tax incentives given to businesses in free zones that do not conduct business onshore remain intact. Also, on domestic and cross-border payments, there will be no withholding taxes.

UAE company’s capital gains and dividends will be exempt from corporate tax.

Individuals will remain tax-free on their profits from labour, real estate, stock investments, and other forms of personal income.

The fee would not apply to foreign investors who do not do business in the country.

Businesses will only have to file one corporate tax return every calendar year, with no need to pay taxes in advance or prepare provisional tax returns.

Facing Competition

The UAE has lately made moves to attract foreign investors to stay, notably by relaxing limitations on corporate ownership rules and granting certain longer-term visas. It has also loosened various Islamic restrictions concerning beverages and unmarried couples, as well as switching to a Monday-Friday workday. Nonetheless, the UAE is up against stiff competition from Saudi Arabia, which is putting in extra effort to lure companies and families to come to the kingdom.

The United Arab Emirates has consistently marketed itself as a destination where international investors and businesses are welcomed. Over time, lower tax rates and a business-friendly climate have managed to improve the 50-year-old nation.

If you have any questions about the new corporate tax regime, the specialists at Carvy Consultants, who have years of expertise, would be glad to assist you.

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