Corporate Tax in the UAE: What Do We Know?

Yesterday, the UAE government announced that a new corporate tax will go into effect on the first of June 2023, providing details on rates and businesses that will start to pay a set percentage of their profit to the UAE government.

The 9% corporate tax in the UAE is not entirely a new one to impose. For years, the UAE had imposed a 20% corporate tax but only on banks and insurance companies.

However, the new announcement made by the Emirati government explains that the time has come for its policies to include a wider range of businesses that are based in the country.

According to the announcement made on Monday, a 9% corporate tax will be imposed on UAE-based businesses that make a profit exceeding 375,000 AED ($102,100 USD).

The announcement explained that smaller businesses that are not making a considerable profit yet will be exempt from the new tax, which highlights the government’s plans to keep supporting smaller businesses in the country.

Corporate Tax in the UAE – Exemptions 

Moreover, the official announcement detailed a number of cases in which corporate tax will not apply, including;

1. Money made through employment.

2. Real estate.

3. Investments in shares.

4. Income that is not related to UAE-based businesses.

5. Businesses based in UAE free zones. 

The announcement of this new tax comes almost three years after the UAE imposed a 5% value-added tax, following the steps of Saudi Arabia and encouraging other GCC countries to do the same, especially that it could have a major impact on foreign investments that have always deemed the UAE a vital option for tax-less investments.

Currently, questions over other neighboring GCC countries imposing similar taxes in the future are on the rise. According to CNBC analysts, Saudi Arabia and Qatar have already imposed corporate taxes, and the UAE has been discussing the matter for several years.

Saudi Arabia has a 20% corporate tax. Oman has a 15% one, while Qatar has a 10%, making the UAE’s 9% the lowest in the region so far.

In response to questions over whether or not the UAE will be planning for a future income tax after the recent corporate one, the Financial Times reported an official UAE denial of such plans.

For the past decade, the UAE and its GCC partners have been exploring new expenditure sources that can help achieve their strategic goals of diversifying their economies and minimizing their reliance on the oil industry.