To further the UAE’s position as a leading global hub for trade and investment and to continue accelerating the UAE’s transformation and achievement of its strategic objectives, the UAE is introducing a federal Corporate Tax commencing for financial years on or after 1 June 2023. A 9% headline corporate tax rate will be introduced for taxable income exceeding AED 375,000. While a 0% tax rate for taxable income up to 375,000 shall be applied to support small businesses and startups.
No corporate tax will apply on foreign investors who do not conduct business in the UAE. Individuals who generate income from employment, real estate, investment in shares or other personal income not related to a UAE trade or business will not be subject to the corporate tax on income. Free zone businesses meeting all necessary requirements can continue to benefit from corporate tax incentives. Corporate tax will not apply on capital gains and dividends received by a UAE business from its qualifying shareholdings. It will also not be applied on qualifying intragroup transactions and restructurings.
Corporate tax will be applied on adjusted accounting net profit of the business. Domestic and cross border payments will not be subject to a withholding tax. The extraction of natural resources will remain subject to Emirate level corporate taxation. Foreign tax will be allowed to be credited against UAE corporate tax payable.
The rollout of UAE’s corporate tax shall position the UAE alongside jurisdictions in meeting international standards on tax transparency and best tax practices. Alsuwaidi & Company will continuously monitor any key developments and further announcements on the implementation of corporate tax in the UAE and will advise our clients accordingly on their corporate tax matters.
Vida Grace Serrano is an associate in the corporate and commercial team at Alsuwaidi & Company. Vida advises clients across oil and gas, real estate, financial services, family businesses and multinationals on a range of matters including corporate, labour and employment, criminal and litigation, arbitration and dispute resolution.