UAE Plans To Introduce Its First Corporate Tax In 2023
The United Arab Emirates is introducing a federal corporate tax for the first time in its history. This recent move is aimed at bringing the country into synchronization with other competitive global markets, but on the other hand, it also undermines the country’s economic status as a tax haven.
The UAE Ministry of Finance announced that the new federal profits tax of 9% will come into force on 1 June 2023. The United Arab Emirates, which includes Abu Dhabi, Dubai, and five other emirates, is slowly introducing additional taxes to raise non-oil revenues.
The new tax framework will come into force in June 2023 and will apply to all business activities in the UAE except the exploitation of natural resources. A tax will be levied when companies’ revenues exceed USD 102000 or Dh375000. The UAE government is introducing a completely new corporate tax to modernize its economy and comply with international tax standards. Moreover, corporate tax is being introduced as the country’s leadership works to close tax fraud loopholes in the global economy. Analysts believe that this measure will improve the Gulf state’s budgetary system. The UAE claims to have the most competitive tax rate in the world.
Important Conclusions
Companies in Emirati free zones are exempt from the new corporate tax as long as they do not carry out their activities onshore. Oil and gas companies are an exception as they have their own tax structures.
To help small businesses and start-ups, corporate profits of up to USD 102000 will not be taxed. In addition, international taxes can be offset against UAE corporate income tax to avoid double taxation. The tax plan will allow groups of UAE companies to pay tax as a single entity or to seek assistance in the event of losses or restructuring.
The tax incentives granted to companies in the free zones which do not carry out business onshore remain unchanged. Domestic and cross-border payments will also be exempt from withholding taxes.
Capital gains and dividends of UAE companies will be exempt from corporate income tax.
Individuals will continue to be exempt from tax on gains from employment, real estate, investments in shares, and other forms of personal income.
No tax will be imposed on foreign investors who are not established in the country.
Companies will only have to file one corporate tax return each calendar year and will not have to pay tax in advance or prepare provisional tax returns.
Competition
The UAE has recently taken steps to attract foreign investors to stay, in particular by easing restrictions on company ownership rules and granting certain long-term visas. It has also relaxed various Islamic restrictions on drinking and unmarried couples, as well as moved to a Monday to Friday working day. However, the UAE faces strong competition from Saudi Arabia, which is making extra efforts to attract businesses and families to come to the kingdom.
The UAE has consistently promoted itself as a
