UAE is going to implement a federal corporate tax on business profits for the first time. The Ministry of Finance of UAE officially announced that the new corporate tax of 9% on profits will take effect on June 1, 2023.
It’s the best opportunity to align the country with several other governments across the world but it also reduces the country’s competitive strength.
As part of its effort to diversify revenue sources away from oil, the UAE has been slowly implementing additional taxes.
The UAE – home to Abu Dhabi, Dubai, and the other five Emirates has started taking initiatives to entice foreign investors to stay, including relaxing limitations on corporate ownership rules and providing long-term visas for some. It has also liberalised switching to a Monday-Friday workweek.
The UAE’s Ministry of Finance announced that a new 9% federal profit tax will start on June 1, 2023. Personal income from employment, real estate, and other investments will remain exempt. Profit earned from a business registered outside the UAE will also be exempt. The corporate tax will apply to the profits of UAE enterprises. These profits must follow financial statements prepared under internationally accepted standards.
The United Arab Emirates has consistently presented itself as a nation where international investors are welcomed and income is tax-free. Low taxes and a business-friendly atmosphere has helped to shape the 50-year-old country over time. Companies in UAE-free zones are likewise exempt from the new corporate tax unless they conduct their services onshore. Oil and gas industries are another exceptions, as they have their own taxation structures. The government will support small businesses by applying a zero percent tax on profits up to AED 375,000.
The ministry said UAE enterprises will get enough time to prepare, and more details will come mid-year.
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