The United Arab Emirates (UAE) announced on Monday that it will introduce a federal corporation tax on company earnings on June 1, 2023, though it will keep the rate low, at 9%, to keep enterprises interested. The Gulf Arab oil exporter has long benefitted from its tax-free status to carve itself a place as a worldwide economic, energy, and tourist center, attracting the world’s ultra-rich.
The new tax will be levied on all corporations and commercial activities in the country, except for the “extraction of natural resources.” The new regime implies a standard statutory tax rate of 9%, as well as a 0% rate for taxable profits up to 375,000 dirhams ($102,107.50). The move will pave the way for the introduction of a global minimum tax rate that would apply a different corporate tax rate to large multinationals.
The UAE continues to make progress in diversifying its budget revenue away from oil, and this tax fits into this strategy. In 2018, the UAE introduced a value-added tax on most goods and services at a standard rate of 5%. The UAE imposes a 20% tax on branches of foreign banks operating in the country and on companies with concession agreements in the oil and gas sector. Businesses in the UAE are exempted from paying taxes on capital gains and dividends received from shareholdings.