The United Arab Emirates (UAE) has recently introduced a new corporate tax law, marking a
significant shift in the country’s tax landscape. This article will provide an in-depth look at the
new UAE Corporate Tax law and its implications for businesses operating in the UAE.
Introduction to the UAE Corporate Tax Law
The new corporate tax law, known as Federal Decree-Law No. 47 of 2022, was issued by the
UAE Ministry of Finance on 9 December 2022. The law provides the legislative basis for the
introduction and implementation of a Federal Corporate Tax in the UAE. The law will be
effective for financial years starting on or after 1 June 2023.
The introduction of the Corporate Tax is intended to help the UAE achieve its strategic
objectives and accelerate its development and transformation. The certainty of a competitive
Corporate Tax regime that adheres to international standards, together with the UAE’s
extensive network of double tax treaties, will cement the UAE’s position as a leading jurisdiction
for business and investment.
Scope and Rate of the UAE Corporate Tax
The new UAE Corporate Tax will apply to all businesses and individuals conducting business
activities under a commercial license in the UAE. This includes free zone businesses, foreign
entities, and individuals only if they conduct a trade or business in the UAE in an ongoing or
regular manner.
The 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.
Exemptions from the UAE Corporate Tax
Certain businesses and income types are exempt from the UAE Corporate Tax. These include
businesses engaged in the extraction of natural resources, dividends and capital gains earned
by a UAE business from its qualifying shareholdings and qualifying intra-group transactions and
reorganizations. Additionally, the tax will not apply to an individuals earnings salary and other
employment income, whether received from the public or the private sector.
Conclusion
The introduction of the UAE Corporate Tax represents a significant change in the UAE’s tax
landscape. Businesses operating in the UAE need to familiarize themselves with the new law
and its implications. The new tax law is expected to bring about increased transparency and
compliance with international tax standards, further enhancing the UAE’s reputation as a
leading global hub for business and investment.
