The UAE Ministry on Monday publicized that the corporate tax will be imposed on enterprise profits in the UAE for the first time from 1st June 2023. Luckily, the rate was kept as low as 9% to maintain its attractiveness for more business investment in the country.
The changes come as UAE seeks to adjust itself with the new international standards that is based on a global minimum tax on multinational corporations launched by the Group of 20 major economies the previous year. This plan targets to set fifteen percent as the base tax to facilitate international competition to provide ground for more appealing rates.
The Gulf Arab oil exporter has for edges benefited from UAE tax-free regime as an international commercial, tourism, and energy hub. To note, a lot of this tax-free regime such as no personal income tax still remains. Nonetheless, the Finance Ministry in UAE said it was imposing a corporate tax on business profits to align with international endeavors to eradicate tax avoidance. Furthermore, the move is out to address challenges that are coming up from the digitalization of the global economy.
Will all Businesses and Commercial Activities Be Taxed?
The new tax announced by the Finance Ministry in the UAE will be levied on all commercial activities and corporations in the country with the exemption of the “extraction of natural resources” which will stand still remain to be charged at the emirate level.
The ministry statement has it the upcoming regime will impose a statutory tax rate of nine percent and zero percent for taxable profits up to dirhams 375,000, which is equivalent to ($102,107.50) so that they can sponsor business startups and small businesses.
The Ministry also said the plan would open the way for the introduction of a global minimum tax rate which will somehow differ from a corporate tax rate to big multinationals that align with the same specific criteria.
In addition, no federal corporate tax will be imposed on real estate, on personal income from employment and other business investment, or any income earned solely by an individual that doesn’t come from other forms of commercial activities or enterprises licensed by the UAE or allowed in the country.
Undersecretary of the Ministry of Finance, Younis Haji Al Khoori said that UAE plays a monumental role as a leading jurisdiction for investment and innovation in helping businesses thrive globally and locally. Moreover, he added that with the imposition of federal corporate tax, the UAE ascertains its commitment to aligning itself with international standards for hindering devious tax practices and allowing tax transparency in the country.