The UAE issued on Friday a decree-law imposing a 9 percent corporate tax on taxable business income exceeding 375,000 dirhams($102,000), according to the official news agency WAM.
From June, all businesses will be subject to the tax, which will be implemented on January 1, 2023.
Profits up to and including the $102,000 threshold will be taxed at 0 percent to help small businesses and startups.
The UAE Ministry of Finance (MoF) confirmed that the Federal Decree-Law on Corporations and Businesses is an important step toward establishing an integrated tax regime that supports the UAE’s strategic objectives and boosts its global economic competitiveness.
According to WAM, the Ministry stated that the Corporate Tax “has been designed in accordance with global best practice to both promote investment and ensure the principles contained in the law are widely accepted and understood.”
The 0 percent threshold for taxable profits up to and including $102,000 has been included in recognition of the critical role of start-ups and small businesses in the UAE economy, and the standard rate of 9 percent ensures that the Corporate Tax regime is among the most competitive in the world, strengthening the UAE’s position as a global business and financial center.
Natural resource extraction activities in the country are exempt from Corporate Tax; however, they are still taxed at the local emirate level. Government entities, pension funds, investment funds, and public benefit organizations can all benefit from additional exemptions.
In recognition of the critical role that free trade zones play in driving the country’s economic transformation, existing free zone entities will be eligible for a 0% Corporate Tax rate on qualifying income.
Corporate Tax will not be applied to salaries or other personal income from employment earned in the government, semi-government, or private sector, according to the provisions of the Corporate Tax Law.
Individuals who invest in real estate in their personal capacity do not pay Corporate Tax on interest and other personal income earned from bank deposits or savings programs.