UAE to introduce 9% corporate tax on business profits from June 1, 2023

UAE introduce 9% corporate tax, The UAE Ministry of Finance will introduce a corporate tax on business profits on financial years starting on or after June 1, 2023. The Ministry also confirmed that there will be no tax on profits of up to Dh375,000, in a move that will help small businesses.

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.

“The UAE is moving gradually from a non-tax environment to a tax environment – that will give the UAE Government additional income to fund the country’s development activities,” said Rizwan Sajan, Chairman of Danube Group. “This comes about four years after the introduction of VAT – on January 1, 2018.

Across the board tax

Until now, UAE’s corporate taxes only applied to banks and insurance companies. They are taxed at 20 percent. Individual emirates have already imposed a limited corporate tax on enterprises engaged in the exploration and production of oil and gas at rates up to 55 percent.

Although personal income tax is still absent in the Gulf, many countries have in recent years rolled out VAT (value-added tax) on individuals and business activities, with Saudi Arabia tripling the rate to 15 percent last year.

The latest UAE announcement should be seen as a natural progression to leading economies of the world wanting to set a minimum tax on corporate. It is intended to stop the practice of corporate titans – especially US technology ones – having skeletal operations in a low tax regime and then paying little on their profits in their home country.

The effort at a minimum corporate tax-cutting across jurisdictions gained traction in the months after the pandemic broke out and nations were facing severe economic disruptions. The UAE’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 due to favorable tax regimes in most countries in the region. However, a number of reforms have been underway to create new revenue streams while reducing dependence on mainstream sources of revenues in the region. In some countries, value-added taxes have already been announced, while in other countries different forms of taxes are being introduced.

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News Courtesy:gulfnews.com