UAE announces new tax: The new Federal Decree-Law was issued on taxation of corporations and businesses to begin in 2023

UAE has officially issued a federal decree-law on corporate tax at a 9 percent rate for taxable business profits exceeding AED375,000. Feder...

UAE has officially issued a federal decree-law on corporate tax at a 9 percent rate for taxable business profits exceeding AED375,000.

Federal Decree-Law No. 47 of 2022 on Taxation of Corporations and Businesses (the “Corporate Tax Law”). Businesses will become subject to UAE Corporate Tax (“Corporate Tax”) from the beginning of their first financial year that starts on or after 1 June 2023.

How the UAE’s new corporate tax will affect employees, residents

Everything you need to know about the UAE’s new corporate tax

The corporate tax will levy a standard rate of 9 percent for taxable profits exceeding AED375,000. Profits up to and including that threshold will be taxed at a zero percent rate to support small businesses and startups.

Existing free zone entities will benefit from a zero percent corporate tax rate on qualifying income.

Corporate tax will not be applied to salaries or other personal income from employment, interest and other personal income earned from bank deposits or saving programmes and investment in real estate by individuals in personal capacity are also not subject to this new tax.

Other exemptions are available to organisations such as government entities, pension funds, investment funds and public benefit organisations due to their vital importance and contribution to the social fabric and economy of the Emirates.

The Ministry of Finance confirmed that the new corporate tax is an important milestone in building an integrated tax regime that supports the strategic objectives of the UAE as well as enhances global competitiveness and provides the economy with flexibility to deal with and support international financial systems of UAE’s established partnerships.