UAE To Introduce New Federal Corporate Tax On Business Profits From June 2023

The UAE announced its decision to introduce a federal corporate tax on business profits. The Ministry of Finance on Monday stated the new rule will be rolled out from the financial year starting on or after June 1, 2023. 

Though the corporate tax, at a standard statutory tax rate, is 9 per cent, a zero per cent tax rate will e applicable on taxable profits up to Dhs375,000 as part of the country’s efforts to support small businesses and startups.  

According to state-run news agency WAM, 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 a business or other form of commercial activity licensed or permitted to be undertaken in the UAE.  

The corporate tax will be payable on the profits of UAE businesses as reported in their financial statements, prepared following internationally acceptable accounting standards, with minimal exceptions and adjustments.  

The corporate tax will be applied to all businesses and commercial activities alike, except for the extraction of natural resources. The tax on natural resources will remain subject to emirate-level corporate taxation.  

According to the reports, UAE will not impose withholding taxes on domestic and cross border payments or subject foreign investors who do not carry on business in the UAE to corporate tax.  

The ministry added that UAE businesses would be given time to prepare for the introduction of this new corporate tax. Further information on the new corporate tax is expected to be provided in the middle of this year.  

“With the introduction of corporate tax, the UAE reaffirms its commitment to meeting international standards for tax transparency and preventing harmful tax practices. The regime will pave the way for the UAE to address the challenges arising from the digitalisation of the global economy and the other remaining BEPS [Base Erosion and Profit Shifting] concerns, and execute its support for the introduction of a global minimum tax rate by applying a different corporate tax rate to large multinationals that meet specific criteria set with reference to the above initiative,” said Younis Haji Al Khoori, undersecretary of the Ministry of Finance.  

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