The United Arab Emirates has officially issued a federal decree-law on taxation of corporations and businesses. As per the federal decree-law No. 47 of 2022, businesses will be subject to the UAE corporate tax, beginning from their first financial year that starts on or after 1 June, 2023.
The corporate tax will levy a standard rate of 9% for taxable profits exceeding 3,75,000 dirhams. Profits up to and including that threshold will be taxed at a zero percent rate to support small businesses and startups.
The Ministry of Finance confirmed that the new corporate tax is an important milestone in building an integrated tax regime that supports the strategic objectives of the UAE as well as enhances global competitiveness and provides the economy with flexibility to deal with and support international financial systems of the UAE’s established partnerships.
Importantly, the principles of equity and fairness across sectors were at the forefront of the corporate tax design, given the UAE’s diverse economy and the importance of driving sustainable development. The Ministry involved relevant stakeholders through public consultation and took into account feedback and views in the final design of the corporate tax regime.
The federal decree-law on taxation of corporations and businesses reflects the Emirates’ support for the G20/OECD (Organization for Economic Cooperation and Development) Inclusive Framework on BEPS (base erosion and profit shifting) – an international collaboration by the implementation of 15 measures to tackle tax avoidance, improve the coherence of international tax rules, and ensure a more transparent tax environment.
The tax will not be applied to salaried or personal incomes from employment, interest, and other personal earnings from bank deposits or savings schemes, and individual real estate investments.
Other exemptions are also available to government entities, pension funds, investment funds, and public benefit organizations due to their vital importance and contribution to the economy and the social fabric of the Emirates.
