United Arab Emirates

United Arab Emirates

Introduced a corporate income tax

01 Jun 2023

On 1 June 2023, the first federal corporate income tax came into effect at a rate of 9 per cent. In order to support small businesses and start-ups, no corporate tax will have to be paid for profits up to AED 375,000 (approximately $102,000), and any income exceeding this amount will be taxed at the full rate.

A different tax rate will apply for large multinational companies that meet specific criteria set with reference to "Pillar Two" of the OECD Base Erosion and Profit Shifting project. Foreign entities and individuals will be subject to corporate tax only if they conduct a trade or business in the United Arab Emirates in an ongoing or regular manner.

The corporate income tax will also apply to free zone businesses, which will be required to register and file a corporate tax return. However, the new corporate tax regime will continue to provide the existing tax incentives to these businesses, to the extent that they do not conduct business with the mainland. To be tax-exempt, SEZ profits must pass a two-step test. First, the business must meet criteria such as maintaining an ‘adequate substance’ in the UAE by, inter alia, having sufficient operations, employees and directors on the ground. For businesses that pass this test, the tax-exemption applies to their ‘qualifying income’.

Nature of measure:
  • Treatment and operation
Type:
  • Treatment and operation (Other)
Industry:
  • Not industry specific
Inward FDI:
No
Outward FDI:
No
Sources: