On 9
December 2022, the UAE issued the Federal Decree-Law No. (47) of 2022 on the
taxation of corporations and businesses. Under the new tax
regime, corporations and other businesses with taxable profits exceeding
Dh375,000 will be mandated to pay a standard rate of 9 percent. The tax will be
effective for financial years starting on or after June 1, 2023.
The Ministry added that the 0 percent threshold for taxable profits up to and including AED375,000 has been included in recognition of the vital role of start-ups and small businesses in the UAE’s economy, and the 9 percent standard rate ensures that the Corporate Tax regime is amongst the most competitive in the world and will strengthen the UAE’s position as a global business and financial centre.
In recognition of the fundamental role of free trade zones in driving the nation’s economic transformation, the existing free zone entities will be eligible to benefit from a 0 percent Corporate Tax rate on qualifying income
The Ministry of Finance designed the corporate tax regime to normalise UAE tax policy because the Arab Gulf nation was blacklisted by the EU as a non-cooperative tax jurisdiction. However, the 9% headline rate is below the OECD’s global minimum rate of 15%.
Nevertheless, the UAE government maintains it supports the
global minimum corporate rate, so it’s possible that the 9% will be raised to
15% if the world implements pillar two.
