Understanding the UAE's New Corporate Tax Law Simple
The United Arab Emirates (UAE) will introduce a federal corporate tax on June 1, 2023. The tax will be levied at a rate of 9% on the net profit of businesses with taxable profits of more than AED 375,000.
The introduction of corporate tax is part of the UAE's efforts to meet international standards for tax transparency and avoid harmful tax practices. It is also expected to help the UAE attract more foreign investment and boost economic growth.
The following businesses are exempt from corporate tax:
- Individuals
- Foreign investors who do not carry on business in the UAE
- Free zone businesses that comply with all regulatory requirements
- Capital gains and dividends received by UAE businesses from its qualifying shareholdings
- Qualifying intragroup transactions and restructurings
Corporate tax will be calculated at 9% of the net profit shown in the company's financial statements. The 9% corporate tax will be levied only if the taxable net profit exceeds AED 375,000.
For example, if the net profit is AED 475,000, the corporate tax will be AED 9,000 (AED 475,000 - AED 375,000 x 9/100).
The UAE Ministry of Finance has published a guide to the new corporate tax law on its website. Businesses should review the guide to understand their obligations under the new law.
The introduction of corporate tax is a significant development for the UAE tax system. Businesses should be prepared to comply with the new law in order to avoid penalties.