UAE Tax Reforms: 9% corporate tax to be implemented from June 1, 2023

The Ministry of Finance in the United Arab Emirates has taken several taxation measures. They announced that federal corporate tax will be implemented on business profits for financial years, which start on or after 1 June 2023, meaning that the first profits to be taxed will be for financial years ending on or after 31 May 2024. With the announcement of a new corporate tax, Emirati officials aim to demonstrate fiscal  strength without disrupting the country’s image as an investment hub.

Key Tax Reforms:

1. 9% corporate tax to be implemented from June 1, 2023.
2. The new tax only applies to:

• profits above 375,000 dirhams;
• multinationals that fall under the OECD/G-20 inclusive framework on base erosion and
• profit shifting may be subject to different rates.

3. No corporate tax will be levied on:

• personal income from employment,
• real estate and other investments, or on any other income earned by individuals not arising from businesses or commercial activities licensed in, or permitted to be undertaken in, the UAE.
• firms operating in natural resource extraction,
• companies registered in free zones.

4. First profits to be taxed will be for financial years ending on or after 31 May 2024.
5. The UAE will not impose withholding taxes on domestic and cross border payments, or subject foreign investors who do not carry on business in the UAE to corporate tax.
6. Foreign taxes will be allowed to be credited against UAE corporate tax payable.
7. The tax-related incentives offered within free zones, such as 50-year renewable exemptions, are becoming increasingly attractive selling points.
8. Multinationals that fall under the OECD/G-20 inclusive framework on base erosion and profit shifting may be subject to different rates.
9. UAE corporate tax Rates applicability (tabular Format):

Source: Media Reports / News etc.

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