Published on 31st Jan 2022.
DUBAI, United Arab Emirates — The United Arab Emirates will be introducing a federal corporate tax on business profits for the first time, the Ministry of Finance announced Monday.
The news represents a significant shift for a country that’s long attracted businesses from around the world thanks to its status as a tax-free commerce hub. Businesses will be subject to the tax from June 1, 2023.
The measure comes as the UAE seeks to align itself with new international standards, particularly the move toward a global minimum tax on multinational corporations endorsed by the Group of 20 major economies last year. The ambitious plan aims to eventually set 15% as the base levy to stem international competition to offer more attractive rates.
The UAE announced in July its support for global tax standards and said Monday that its new 9% rate, which will come into effect in June 2023, would provide a basis to apply that support, though in the UAE many of these large corporations operate inside free zones and will remain exempt provided they don’t do business with the mainland.
“Introducing a CT regime reaffirms the UAE’s commitment to meeting international standards for tax transparency and preventing harmful tax practices,” That’s according to Younis Haji Al Khoori, Under-secretary at the Ministry of Finance.
No corporate tax will apply on personal income from employment, real estate and other investments, or any other income earned by individuals that do not arise from business or other forms of commercial activity, licensed or otherwise.