The government of UAE would be imposing a corporate tax starting June, 2023 with firms posting Dh375,000 profit per annum to pay 9% tax.
The Corporate Tax will apply to all businesses and individuals conducting business activities under a commercial licence in the UAE as well as free zone businesses (The UAE CT regime will continue to honour the CT incentives currently being offered to free zone businesses that comply with all regulatory requirements and that do not conduct business set up in the UAE’s mainland.)
Moreover, it will be imposed on foreign entities and individuals only if they conduct a trade or business in the UAE in an ongoing or regular manner.
A statement by the authorities said that the ‘introduction of Corporate Tax is intended to help the UAE achieve its strategic objectives and accelerate its development and transformation’.
Exemptions from the tax
Businesses engaged in the extraction of natural resources are exempt from the tax as these businesses will remain subject to the current Emirate-level corporate taxation.
Moreover, dividends and capital gains earned by a UAE business from its qualifying shareholdings will be exempt from the tax. On the same lines, qualifying intra-group transactions and reorganizations will not be subject to the tax, provided the necessary conditions are met.
The corporate tax will not apply to an individual earnings salary and other employment income, whether received from the public or the private sector
Moreover, it will not be levied on interest and other income earned by an individual from bank deposits or saving schemes.
Moreover, a foreign investor’s income earned from dividends, capital gains, interest, royalties and other investment returns is also exempted.
Investment in real estate by individuals in their personal capacity is also out of the purview of the tax as well as dividends, capital gains and other income earned by individuals from owning shares or other securities in their personal capacity.
The UAE government seems to be introducing a spree of reforms to shore up its economy. The authorities are also mulling over imposing a tax on the overcrowding of residential areas. A campaign in this regard would be kicked off in the next few months under which a fine to the tune of 1 Million Dh would be imposed on the violators.
