‘It’s the new big change’…UAE to introduce a federal corporate tax from mid-2023

The United Arab Emirates adopted a new workweek schedule consisting of four-and-a-half days with Friday afternoon, Saturday, and Sunday forming the new weekend recently in January first week. Soon after the major shift in the country’s plan to align closer with global markets, the Arab nation UAE now aims to introduce a corporate tax from mid-2023, the finance ministry said on January 31. 

According to the ministry, UAE will introduce a federal corporate tax on business profits that will be effective after June 1, 2023. The decision has been seen as the first time in the history of the UAE. It is the latest measure to bring the country in line with many governments worldwide but also one that is undermining its competitive advantage.

“The UAE corporate tax regime will be amongst the most competitive in the world,” said a statement carried by the official WAM news agency. Nine percent is at the lower end of corporate taxes worldwide. 

At present, there is no corporate tax in the UAE at the Federal level, but some individual emirates impose a limited corporate tax on enterprises engaged in exploration and production of oil and gas and on branches of foreign banks operating in the UAE. The new tax will be levied on all corporations and commercial activities in the country, except for the “natural resource extraction” that remains taxable at the emirate level.

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The ministry further said, that there are no plans to introduce personal income tax or capital gains tax from real estate or other investments, the ministry said. With a standard statutory tax rate of 9 percent and a 0 percent tax rate for taxable profits up to AED375,000 to support small businesses and start-ups, the UAE corporate tax regime will be among the most competitive in the world.

Younis Haji Al Khoori, Undersecretary of the Ministry of Finance, said in the statement that with the introduction of corporate tax, the UAE makes sure its commitment to meeting international standards for tax transparency and preventing improper tax practices. 
Earlier in 2018, the Arab nation introduced a value-added tax on most goods and services at a standard rate of 5%. The UAE imposes a 20% tax on branches of foreign banks operating in the country, and on companies with concession agreements in the oil and gas sector of up to 55% at the emirate level.