The UAE has issued Federal Decree-Law No. (47) of 2022 regarding corporate and business tax, provided that businesses in the country are subject to corporate tax starting from its first fiscal year, which starts on or after June 1, 2023.
According to the law, the “corporate tax” was set at a rate of 9% on taxable income that exceeds the amount of 375 thousand dirhams, and at a rate of 0% on the part of taxable income that does not exceed that amount. The Ministry of Finance affirmed that the federal law on corporate and business tax constitutes an important step in the framework of strengthening an integrated tax system that supports the strategic goals of the UAE, enhances its global economic competitiveness, and provides the national economy with sufficient flexibility to deal with international financial systems and support them within the framework of existing partnerships. with the state.
The ministry indicated that the country's corporate and business tax law was developed taking into account the best international practices to promote investments and ensure that the principles contained in the law are widely understood. As well as to implement the new tax system in a manner that guarantees more efficiency and transparency, based on the diversification of the country's economy, and ensures the promotion of sustainable development.
To this end, the Ministry has involved all relevant stakeholders through public consultation and has taken feedback and opinions into the final design of the corporate and business taxation system.
The Ministry of Finance stated that determining the 0% rate on the part of the taxable income that does not exceed 375 thousand dirhams comes in appreciation of the vital role played by start-ups and small companies in the UAE economy, and the basic 9% tax rate ensures that the corporate tax system in the UAE is among the most important. The most competitive system in the world contributes to strengthening the position of the UAE as a financial center and a global business center.
The corporate tax law reflects the UAE's keenness to enhance its international contribution, support the Organization for Economic Cooperation and Development in its commitments to set a global minimum tax for the profits of multinational companies, enhance tax transparency, and prevent harmful tax practices. It also enhances its active contribution to the initiative to combat the erosion of the tax base.
Under the provisions of the law, corporate and business tax in the UAE will not be applied to an individual's salary or any other income earned from a job he holds, whether it is earned from work in the government, semi-government or private sector. Interest and other personal income earned from interest and other types of income from bank deposits or savings schemes are not subject to corporate and business tax, as are investments in real estate by individuals in their personal capacity.
