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UAE introduces first corporate tax, to start in 2023

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Panoramic view of downtown Dubai, United Arab Emirates, on December 8, 2021.

Satish Kumar | Reuters

DUBAI, United Arab Emirates – The United Arab Emirates will introduce a federal corporate tax on corporate profits for the first time, the Ministry of Finance announced on Monday.

The news represents a major shift in the country, which has long attracted businesses from around the world due to its status as a duty-free business hub. Businesses will pay tax from 1 June 2023.

The country’s statutory tax rate will be 9 percent for taxable income above AED 375,000 ($102,000), and zero for taxable income “supporting small businesses and start-ups,” the ministry said, adding that ” The UAE corporate tax system will be among the most competitive in the world.”

The ministry said individuals will still not be taxed on employment income, real estate, equity investments or other personal income not related to UAE trade or business. The tax also does not apply to foreign investors who do not conduct business in the country.

As for what constitutes profit, corporation tax will apply to the “adjusted accounting net profit” of the business.

Meanwhile, free zone businesses – there are thousands in the country – can “continue to benefit from corporate tax incentives” as long as they “fulfill all necessary requirements”, the ministry said, without elaborating. Companies in many of the UAE’s free zones have long enjoyed benefits such as zero taxes and full foreign ownership.

“The UAE corporate tax regime is designed to incorporate global best practice and minimize the compliance burden on businesses,” wrote state news agency WAM.

“Profits reported in the financial statements of UAE businesses prepared in accordance with internationally accepted accounting principles will be subject to corporate tax, with minimal exceptions and adjustments. Corporate tax will apply to all corporate and commercial activities, except for the extraction of natural resources which will Continue to pay corporate tax at emirate level.”

“Practical and sensible”

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