The UAE tax regime is renowned around the world for promoting business development. In 2023, there will be a change to the current system with the introduction of a new Corporate Tax. The move is a landmark moment for UAE tax policy administration and offers companies – and the seven Emirates – new strategic opportunities.
His Excellency Younis Haji Al Khoori, Undersecretary of Ministry of Finance, underlined this point:
“As a leading jurisdiction for innovation and investment, the UAE plays a pivotal role in helping businesses grow, locally and globally. The certainty of a competitive and best in class Corporate Tax regime, together with the UAE’s extensive double tax treaty network, will cement the UAE’s position as a world-leading hub for business and investment. The introduction of a Corporate Tax regime will help the UAE achieve its strategic ambitions and incentivise businesses to establish and expand their activities in the UAE.”
So what does the new UAE corporate tax regime mean for your company? To assess its impact, you first need to get up to speed with all the relevant aspects of the new legislation. The next step is to implement all the necessary systems to make sure you meet the requirements of the new regulations. There’s no time like the present: get started now by reading our overview of the new tax regime.
Details of the new UAE Corporate Tax Law
On the 9 December 2022, the UAE Ministry of Finance published the Federal Decree-Law No. 47 of 2022 on Taxation of Corporations and Businesses, also known as the Corporate Tax Law. The legislation follows the public consultation document released on the 28 April 2022, which lays out the principal aspects of the new corporate tax in the UAE in 2023.
The Corporate Tax Law will see companies levied with a Corporate Tax of 9% on profits above AED 375,000. The new law will become effective for accounting periods beginning on or after the 1 June 2023. In practice, this means that companies with a December year end have a 12-month period to prepare for the change and assess its impact.
The new UAE Corporate Tax rate is subject to “taxable persons”, which are defined as follows by the Ministry of Finance:
- UAE companies and other juridical persons that are incorporated or effectively managed and controlled in the UAE
- Natural persons (individuals) who conduct a Business or Business Activity in the UAE as specified in a Cabinet Decision (to be issued in due course)
- Non-resident juridical persons (foreign legal entities) that have a Permanent Establishment in the UAE.
Exemptions
The first notable exemption to the new corporation tax rate in 2023 are companies whose profits fall beneath the AED 375,000 threshold. In a move to support small businesses and start-ups, businesses in this category will be taxed at 0%.
Under certain conditions, the following persons will also be exempt for Corporate Tax:
- A person engaged in the exploitation of UAE natural resources (both extractive and non-extractive)
- Government and Government-controlled entities
- Qualifying public benefit entities
- Charities and public benefit organisations
- Pension or social security funds
- Qualifying investment funds
Certain exemptions will be subject to a number of conditions, including notifications to the Ministry of Finance, listings in a Cabinet Decision and approval by the Federal Tax Authority.
Opportunities
Beyond its benefits for the UAE as a whole, the new Corporate Tax represents a host of opportunities for companies. Namely, the new tax regime will make the UAE compliant with international rules and reduce fears that companies based in the Emirates may have an unfair advantage. This, in turn, will benefit UAE businesses as they will not be viewed with suspicion.
Companies will also be more prudent as the new UAE tax rate will encourage them to do due diligence when it comes to their investments, promoting sustainable investments inside the country.
Next steps
Companies are advised to ensure they understand the new law and have all the necessary systems in place to meet all its requirements well in advance. If you need a helping hand with this, don’t hesitate to contact our consultants, who will be delighted to provide you with advice pertaining to your situation.
Written by
Adrian Oton,
CEO, Europe Emirates Group
