The UAE will impose a 9% corporate tax on companies from June 2023

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The UAE will impose a 9% corporate tax on businesses, starting next year, according to a statement by state news agency WAM.

A statement from the Ministry of Finance (MoF), posted on WAM’s Twitter feed, said the federal corporation tax will be in effect for financial years beginning on or after the 1st.st June 2023.

There will be a standard statutory tax rate of nine percent for corporate profits above AED 375,000 ($102,000) with profits below that taxed at zero percent, with the aim of supporting small businesses, says the press release.

The statement states that no corporation tax will apply to income from employment, real estate or other investments, or any other income that does not arise from a permitted trade or business activity or otherwise authorized to be undertaken in the UAE.

The new corporate tax regime will continue to honor the incentives of the free zones, recognizing the contribution of the zones to the UAE’s economy, the Ministry of Finance told WAM, saying that those who comply with all regulations and do not do business with companies in the mainland UAE will still qualify for free. zone incentives.

Free zone incentives across the UAE include 100% foreign ownership, 100% repatriation of capital and profits, import and export tax exemptions and tax exemption on income and on corporations.

Younis Haji Al Khoori, Undersecretary of the Ministry of Finance, said the new regime will help the UAE address challenges arising from the digitalization of the global economy as well as those arising from concerns over the erosion of tax base and profit shifting (BEPS).

It will also execute the country’s support for the introduction of a global minimum tax rate by applying a different corporate tax rate to large multinationals that meet specific criteria, Al Khoori said in a statement to the WAM news agency.

He said: “The certainty of a competitive and best-in-class corporate tax regime, along with the UAE’s extensive network of double tax treaties, will cement the UAE’s position as a global hub for business. business and investment,” adding, “With the introduction of corporate tax, the UAE reaffirms its commitment to upholding international standards of tax transparency and preventing harmful tax practices.

Withholding tax will not be imposed on domestic or cross-border payments, and foreign investors who do not do business in the UAE will not be subject to the new tax.

UAE companies will be exempt from tax on capital gains and dividends received from qualifying holdings and foreign taxes may be deducted from corporate tax payable in the UAE.

“The UAE corporate tax regime will have generous loss utilization rules and allow UAE groups to be taxed as a single entity or to apply group relief with respect to losses and transactions and intra-group restructurings,” the ministry said, adding that the regime will ensure the compliance burden is minimized for companies that prepare and maintain adequate financial statements.

“Companies will only need to file one tax return per fiscal year and will not be required to make advance tax payments or prepare interim tax returns,” he added, concluding. companies will have enough time to prepare.

(Writing by Imogen Lillywhite; editing by Seban Scaria)

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© ZAWYA 2022

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