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The corporate tax regime of the United Arab Emirates will impose a 9 percent fixed rate on taxable profits over AED375,000. Profits will be taxed at a rate of 0% to support small businesses and start-ups. The Federal Declaration on Taxation of Companies and Businesses is an important milestone in supporting the strategic objectives of the UAE and promoting its global economic competitiveness, as well as adequate flexibility to handle and support the national economy within the established framework of the UAE.
The ministry noted that the corporate tax regime was designed to promote investment and to ensure that the policies included in the law are widely accepted and understood. Importantly, in terms of the importance of driving the different economy and sustainable growth of the UAE, fair and equity policies were at the forefront of the design of the corporate tax regime.
For this purpose, the ministry engaged the relevant shareholders through public consultation and took into account the concept and views in the final design of the corporate tax regime. AED375,000 has added a 0 percent threshold for profits that can be recognized as a major role in startup and small businesses in the UAE’s economy, and the 9 percent fixed rate ensures that the corporate tax regime is the most competitive in the world and strengthens the status of the United Arab Emirates as a global business and financial hub.
The Corporate Tax Act reflects the UAE’s support for the construction of the Global Minimum Tax for Multinational Corporations, the development of tax transparency and its obligations to prevent harmful tax practices. Exclusions from the corporate line are highly targeted. Natural resource extraction activities in the country are exempted from corporate tax; However, they are subject to existing local emirate-level taxation.
Other exemptions are available to government agencies, pension funds, investment funds and public benefits companies due to the importance and contribution to the social fabric and economy of the UAE. Existing free zoning companies are eligible to benefit from the 0 percent corporate tax rate of the eligible income in order to recognize the fundamental role of free trade zones in the economic transformation of the country.
Corporate tax compliance and administrative requirements are designed to suit a variety of taxpayers to recognize the diversity of businesses that fall within the boundaries of the new corporate tax regime. In addition, the corporate tax regime generously relieves internal-group transfers and restructuring, and allows group companies to use tax losses available to each other.
Under the provisions of the Corporate Tax Act, corporate tax pay or other personal income from employment is not used, whether earned from government, semi-government or private sector. Other personal income from interest and bank deposits or savings plans is not subject to corporate tax, and individuals invest in real estate in their personal potential.
The Ministry will be a competent official for the purposes of bilateral and multilateral agreements and for international communication for tax purposes. The Federal Tax Commission is responsible for the administration, collections and enforcement of the Corporate Tax Act.
