The United Arab Emirates is one of the very few countries without a federal income tax for corporate businesses. However, according to information, it will launch a tax on business profits starting from 2023.
The UAE will introduce a federal corporate tax on business profits, its Ministry of Finance has said. According to the data, the corporate tax has been set at a standard statutory tax rate of 9%. However, a zero per cent tax rate will be applicable on taxable profits up to Dhs375,000 (about $102,000). Such an exception is made in an attempt to support small businesses and startups. The new corporate tax also does not apply to companies in Emirati free zones unless they conduct their business outside the UAE. “As an international headquarter location, a UAE business will be exempt from paying tax on capital gains and dividends received from its qualifying shareholdings, and foreign taxes will be allowed to be credited against UAE corporate tax payable,” the ministry said. The corporate tax will apply to all businesses, except for the extraction of natural resources, which will remain subject to emirate-level taxation.
According to officials, this measure set the stage for the introduction of a global minimum tax rate for large multinationals. The introduction of a 9% tax reflects the country's efforts to diversify budget revenues. The authorities want to reduce dependence on oil, which has been the mainstay of the economy for decades.
