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8 March, 2022

UAE Federal Corporate Tax from 2023

UAE Ministry of Finance announced that it will introduce a federal corporate tax on profits from June 1, 2023, onwards.

A standard statutory tax rate of 9 percent applies for companies in the UAE, positioning it competitively against other financial centers and developed economies throughout the world. The average corporation tax rate is 21.3% in EU27 countries, 23.4% in OECD countries, and 69.6% in the G7, according to the Washington, D.C.-based Tax Foundation.

“The tax regime will be among the most competitive in the world,” the ministry said. It will be in line with World Trade Organization rules.

There will be no tax imposed on personal income earned from employment, real estate, or investment, or on income earned by individuals not derived from a commercial activity licensed by the UAE or otherwise permitted in the country.

In this scenario, foreign taxes are credited against the amount of UAE corporate tax payable, meaning that double taxation will not occur. Capital gains and dividends received from qualifying shares of U.A.E. businesses will not be subject to tax.

Combined with the UAE’s extensive network of double tax treaties, the certainty of a competitive and best-in-class corporate tax regime will cemented the UAE’s status as a world leader in business and investment.

Throughout the past 40 years, corporate tax rates, as measured by the Tax Foundation, have steadily declined, with the worldwide average down to 25 to 30 percent.

According to the organization, corporate tax rates worldwide have dropped from close to 50% in the 1980s to about 25% in 2021.

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