UAE to implement corporate taxes from 2023 for the first time ever

• Statutory tax rate will be 9% for taxable income exceeding 375,000 UAE dirhams

• The federal corporate tax will be implemented from June 1, 2023

The United Arab Emirates will be implementing a federal corporate tax on business profits for the first time, the Ministry of Finance announced on Monday.

The tax will be implemented from June 1, 2023. UAE has been a tax-free hub because of which it has attracted many businesses in the country.

The ministry said the statutory tax rate for taxable income exceeding 375,000 UAE dirhams (or $102,000) will be 9%.

The ministry added that “the UAE corporate tax regime will be amongst the most competitive in the world.” Corporate tax will be applicable on “the adjusted accounting net profit” of the business.

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Tax will not be applicable on individuals’ incomes from employment, real estate, equity investments or other personal income unrelated to UAE business.

The ministry said that the free zone business can “continue to benefit from corporate tax incentives” as long as they “meet all necessary requirements.” Benefits of conducting business in UAE’s free zones include zero taxes and full foreign ownership, among others.

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“The UAE corporate tax regime has been designed to incorporate best practices globally and minimise the compliance burden on businesses,” state news agency WAM wrote.

“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, with minimal exceptions and adjustments. The corporate tax will apply to all businesses and commercial activities alike, except for the extraction of natural resources which will remain subject to Emirate level corporate taxation.”

(With inputs from CNBC)

Picture Credits: Reuters