The Ministry of Finance of the UAE will start levying a 9 percent federal corporate tax on business profits from June 1, 2023 thereby putting an end to tax-free culture that enabled the country to lure businesses from around the world.
According to WAM, the ministry has confirmed that it will impose a standard statutory tax rate of 9%, as well as a 0% rate on profits of up to AED375, 000, a measure that could potentially help small businesses.
The press statement added that no corporate tax will be levied 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 tax will be levied on all corporations and commercial activities in the country, except for the “extraction of natural resources” which will remain subject to taxation at the emirate level.
In 2018, the UAE introduced value added tax on most goods and services at a standard rate of 5%.
The UAE in recent years has been looking toward other sources of revenue in order to reduce its dependence on revenue earned from crude oil sale. The country is the third largest producer of crude oil in OPEC.
Businesses in the UAE are exempted from paying taxes on capital gains and dividends received from shareholdings.
The new program left intact the exemption for individuals from income tax, capital gains tax on real estate and other investments, and other earnings that do not come from a business.
The UAE corporate tax regime will continue to honor the corporate tax incentives currently being offered to free zone businesses that comply with all regulatory requirements and that do not conduct business with mainland UAE, the ministry said.
