Abu Dhabi, February 1 (BNA): The Ministry of Finance has announced that the United Arab Emirates will apply a federal corporate tax on business profits which will be effective for fiscal years beginning on or after June 1, 2023. Companies will become subject to UAE corporate tax from the beginning of the first fiscal year in which Starting on or after June 1, 2023.
The UAE corporate tax system is designed to incorporate best practices globally and reduce the burden of compliance on businesses. Corporate tax will be paid on UAE corporate profits as stated in their financial statements prepared in accordance with internationally accepted accounting standards, with minimal exceptions and adjustments. Corporate tax will be applied to all business and commercial activities alike, except for the extraction of natural resources which will remain subject to emirate-wide corporate tax.
With a standard statutory tax rate of 9% and a tax rate of 0% for taxable profits up to AED 375,000 to support small businesses and start-ups, the UAE corporate tax system will be among the most competitive in the world, Emirates News Agency (WAM) said. ) mentioned.
No corporate tax will be applied to personal income from business, real estate and other investments, or to any other income earned by individuals that does not arise from a business or any other form of business activity authorized or otherwise permitted in the UAE.
“As a leading jurisdiction for innovation and investment, the UAE plays a pivotal role in helping businesses grow locally and globally. The certainty of a competitive and best-in-class corporate tax system, combined with the UAE’s extensive network of dual tax treaties, will lead to Establishing the UAE’s position as a leading global center for business and investment, said Undersecretary of the Ministry of Finance, Younis Haj Al-Khoury.
In recognition of the contribution of free zones to the economy and competitiveness of the UAE, the UAE corporate tax system will continue to honor the corporate tax incentives that are currently offered to free zone companies that comply with all regulatory requirements and that do not conduct business with the UAE mainland.
Due to the UAE’s position as a global financial center and international business hub, the UAE will not impose withholding tax on domestic and cross-border payments, or subject foreign investors who do not conduct business in the UAE to corporate tax.
As an international principal, a UAE company will be exempt from paying taxes on capital gains and profits received from its eligible shares, and foreign tax deductions will be allowed from corporate tax payable in the UAE.
The UAE corporate tax system would have generous rules for the use of losses and would allow the taxation of UAE groups as a single entity or the application of a collective exemption for losses, transactions and restructurings within the group.
The corporate tax system in the UAE will ensure that the burden of compliance is kept to a minimum for companies that prepare and maintain adequate financial statements. Businesses will need to file only one tax return per fiscal year and will not be required to make advance tax payments or prepare interim tax returns. Transfer pricing and documentation requirements will be applied to UAE companies with reference to the OECD Transfer Pricing Guidelines.
“The introduction of a corporate tax system will help the UAE achieve its strategic ambitions and motivate companies to establish and expand their activities in the UAE,” said Younes Haj Al-Khoury.
UAE companies will be given plenty of time to prepare for the imposition of corporate tax in the UAE. The UAE Ministry of Finance plans to release more information about the UAE corporate tax system by the middle of the year to help companies prepare for and fully comply.
MI