UAE to introduce corporate tax regime

The UAE is set to introduce a federal-level corporate tax of 9%. (Getty Images)

The United Arab Emirates (UAE) is to introduce a new federal corporate tax on financial years starting from 1 June 2023, the country's Ministry of Finance announced on 31 January.

A statutory tax rate of 9% will apply, with profits up to AED375,000 (USD102,082) taxed at 0% to encourage small businesses and start-ups. A different tax rate for large multinational corporations that meet a specific set of criteria as set out under the Organisation for Economic Co-operation and Development's (OECD's) Base Erosion and Profit Shifting project will also be introduced.

Businesses established in free zone areas within the UAE will be required to pay the tax. However, those companies that do not conduct business with the mainland UAE will continue to receive the existing corporate tax incentives being offered.

“As a leading jurisdiction for innovation and investment, the UAE plays a pivotal role in helping businesses grow, locally and globally. The certainty of a competitive and best-in-class corporate tax regime, together with the UAE's extensive double tax treaty network, will cement the UAE's position as a world-leading hub for business and investment,” Younis Haji Al Khoori, Undersecretary of the Ministry of Finance, said in a statement.

The introduction of a corporate tax regime comes four years after the UAE introduced a 5% value-added tax (VAT) to purchases in the country. The creation of the VAT requirement was a further step to securing additional sources of revenue for the government beyond hydrocarbons.