Overview of the UAE's Corporate Tax Landscape
Introduction
The United Arab Emirates (UAE) issued Federal Decree-Law No. (47) of 2022, known as the “Corporate Tax Law,” on 09 December 2022. This legislation establishes the framework for the implementation of a Federal Corporate Tax (“Corporate Tax”) in the UAE, applicable for financial years commencing on or after 1 June 2023.
The introduction of Corporate Tax aligns with the UAE’s strategic objectives, aiming to expedite its development and transformation. The establishment of a competitive Corporate Tax regime, in accordance with international standards and supported by the UAE’s extensive network of double tax treaties, solidifies the UAE’s position as a premier jurisdiction for business and investment.
Given the UAE’s status as an international business hub and a global financial center, the Corporate Tax regime incorporates globally recognized best practices and principles. This approach ensures that the Corporate Tax system in the UAE is transparent, easily comprehensible, and aligns with internationally accepted norms.
Imposition of Corporate Tax
Regarding the imposition of Corporate Tax, it will be levied on Taxable Income at rates specified in the Decree-Law. The Corporate Tax rates are delineated as follows:
Corporate Tax Rate
- 0% (zero percent) on the portion of Taxable Income not exceeding the amount specified by a Cabinet decision at the Minister’s suggestion.
- 9% (nine percent) on Taxable Income surpassing the specified amount in a Cabinet decision made at the Minister’s suggestion.
Corporate Tax Rates for Qualifying Free Zone Persons:
- 0% (zero percent) on Qualifying Income with certain conditions
- 9% (nine percent) on Taxable Income that does not qualify as Qualifying Income under Article 18 of this Decree-Law, and as specified in any Cabinet decision made at the Minister’s suggestion in this regard.
Summary
The United Arab Emirates (UAE) introduced the Federal Decree-Law No. (47) of 2022, known as the Corporate Tax Law, on December 9, 2022. This law establishes the framework for implementing a Federal Corporate Tax (Corporate Tax) in the UAE, effective for financial years starting on or after June 1, 2023. The purpose is to support the UAE’s strategic goals, promote development, and ensure a competitive Corporate Tax regime in line with international standards.
The Corporate Tax rates are set at 0% on a specified portion of taxable income and 9% on income exceeding that amount. The regime, applicable to both domestic and international businesses, aligns with global best practices and aims to solidify the UAE’s position as a top destination for business and investment.
Additionally, the law outlines specific rates for Qualifying Free Zone Persons, with 0% on Qualifying Income and 9% on taxable income that does not qualify.
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This article was published on 11 January 2024.
