UAE Will Impose 9% Corporate Tax On These Businesses From 2023: UAE Is No More A Tax Haven!
They say nothing comes free and if anything comes at a no-cost then you are the product. And this is what exactly has happened in UAE in the recent past. It lured corporates all over the world with its no-tax systems. Corporates established their hubs in the country and now the system is being reversed. Henceforth these corporates will be subjected to taxes of some sort.
This move is in line with the global appeal for some sort of universal tax for curbing the corporates which are evading taxes by shifting to tax heavens.
UAE introduces federal corporate tax at the rate of 9%
Recently the United Arab Emirates (UAE) announced its intention to introduce a federal corporate tax on business profits for the first time starting from June 1, 2023. As of now, the government has kept the tax rates low at 9 percent, to maintain its attractiveness for businesses.
For a long, the country has been a magnet for the globe’s ultra-rich and has carved out a role as an international commercial, energy and tourism hub.
The country has not made any major changes to personal income tax. Much of this tax-free regime, including no personal income tax, remains. The Finance Ministry said that the move was to address challenges arising from the digitalization of the global economy.
The new tax will be levied on all corporations and commercial activities in the country, except for the “extraction of natural resources” which will remain subject to taxation at the emirate level. In the new regime, there will be 0% rate for taxable profits up to 375,000 dirhams ($102,107.50) in order to support small businesses and startups.
UAE focuses on diversifying the revenue sources
The move to a tax of 9% is in line with the country’s efforts to diversify budget revenues to reduce reliance on petroleum, for decades the mainstay of the economy.
Khatija Haque, the chief economist at Emirates NBD, said “The UAE continues to make progress in diversifying its budget revenue away from oil, and a corporate tax fits into this strategy. The tax rate remains low by global standards”.
It should be noted that businesses in the UAE are exempted from paying taxes on capital gains and dividends received from shareholdings. At the same time, there are no changes in the exemption for individuals from income tax, capital gains tax on real estate and other investments, and other earnings that do not come from a business.