The UAE will introduce corporate tax at 9% with effect from June 01, 2023, setting a threshold of Dh375,000 profit per annum for the companies.
The UAE government has released the tax law last week, revealing some important details for companies to be prepared for the new tax regime, whilst the threshold has been set in line with the government’s efforts to support small and medium enterprises and startups.
Even though almost every country has levied corporate tax, many of them have imposed it at more than double the rate of the UAE, making UAE’s levy one of the lowest corporate taxes in the world.
Hence, UAE residents earning a salary which exceeds Dh375,000 will not have to pay the relevant tax, yet, Corporate tax will not be applicable to the personal income earned from bank deposits, savings programmes, investments, dividends, or foreign exchange gains. However, Individuals holding the freelance permit, under the self-sponsorship and earning income in excess of the threshold will be subject to corporate tax.
Until now, UAE’s corporate taxes were applied only to banks and insurance companies, at 20 per cent, while individual emirates have already imposed a limited corporate tax on enterprises engaged in the exploration and production of oil and gas at rates up to 55 per cent.
Income Tax is still absent in Gulf, but many countries have rolled out VAT (value added tax) on individuals and business activities, so far in recent years along with Saudi Arabia tripling the rate up to 15 per cent last year.
