UAE is going to introduce 9% corporate tax on the businesses profit on financial years starting on or after June 2023. The Ministry also confirmed that..
UAE to introduce 9% corporate tax on the businesses profit from 2023
UAE is going to introduce 9% corporate tax, The UAE Ministry of Finance will introduce a corporate tax on the businesses profit on financial years starting on or after June 1st, 2023. The Ministry also confirmed that there will be no tax on profits which are up to Dh375,000, a move that will help small businesses.
No corporate tax will be applied on personal income from employment, real estate, other investments, or any other income that is earned by individuals which do not arise from business or other forms of commercial activities, licensed or otherwise.
“The UAE is moving gradually from a non-tax environment to a tax environment – that will give the United Arab Emirates (UAE) Government additional income for fund of country’s development activities,” said Rizwan Sajan, Chairman of Danube Group. “It came about four years after the introduction of VAT – on January 1st, 2018.
Until now, United Arab Emirate's corporate taxes only applied to the banks and insurance companies. They are taxed at 20 percent. Individual emirates had already imposed a limited corporate tax on enterprises engaged in the exploration and production of oil and gas at rates up to fifty-five percent (55%).
Although personal income tax is still being absent in the Gulf, in recent years many countries have rolled out VAT (value-added tax) on individuals and business activities, with Saudi Arabia tripling the rate to 15% last year.
The latest United Arab Emirate's announcement must be seen as a natural progression to the leading economies of the world wanting to set a minimum tax on corporate. It is planned to stop the practice of corporate titans – especially US technology ones – having skeletal operations in a low tax regime and then paying a minimum amount on their profit in their home country.
The effort on a minimum corporate tax-cutting across jurisdictions gained traction in the months after when the pandemic broke out and nations were facing critical economic disruptions. The United Arab Emirate's move to introduce across-the-board capital gains tax “brings the UAE’s corporate tax regime to be in sync with the global moves,” said a tax consultant.
The GCC remains an attractive jurisdiction for foreign investment because of favorable tax regimes in most countries in the region. However, a number of reforms have been in progress to create new revenue streams while reducing dependency on mainstream sources of revenues in the region. In several countries, value-added taxes have already been announced, while in other countries different forms of taxes have been introduced.