UAE Announced New Corporate Tax Implementations

A recent announcement released by the Ministry of Finance (MoF) in the United Arab Emirates has set the income threshold that will be considered as part of the corporate tax implementation in the country. The new threshold will be useful for businesses operating in the United Arab Emirates to understand the amount of tax that needs to be paid, once the system becomes official starting June 1, 2023.

According to the new tax threshold, businesses that are registered/operating in the United Arab Emirates and have an operating income of over AED375,000 per year will be subjected to corporate tax starting the month of June this year. Any business in the United Arab Emirates that makes a yearly revenue of less than that AED375,000 will not be subjected to taxation.

9 Percent Tax for Businesses with Income Over the Threshold in UAE

For businesses that do go above the AED375,000 per year revenue threshold that is currently set, the taxation is currently set at nine percent. This means that any business that has an operating income over the threshold will have to pay a yearly corporate tax of 9 percent.

The latest announcement is in line with the federal decree-law that was announced back in December 2022, which stated the implementation of taxes for businesses, corporations, and incorporated individuals operating in the UAE.

As part of the new threshold announcement, Younis Haji Al Khoori, the Undersecretary at the Ministry of Finance in the UAE, said that “The decision made by the UAE cabinet on the income threshold applicable for the implementation of corporate tax is in confirmation of the taxable rates that were announced earlier.”

He also mentioned that “The taxable income threshold for businesses was decided after careful consideration of the market conditions in the United Arab Emirates, ensuring the taxation process is in line with the global standards and that the new policy has a competitive and fair outlook on all the business sectors of the country.”

Al Khoori further added that “The move to not have any taxation on businesses that make less than AED375,000 per year is a significant move which showcases the ongoing motivation and support that the UAE leadership and the government of the country offer to the small-scale businesses as well as the startups that function in the country, recognizing their highly-valuable contribution to the vital growth of the economy of the country in the present and the future as well.”

As part of the new taxation laws implemented, starting June 1, 2023, corporations or individuals running one business or more, are liable to pay corporate tax to the government of the UAE. The new threshold basically sets minimum income criteria for businesses to be eligible to pay taxes.

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Tax exemptions are made available for the below type of entities:

• Government or government-controlled entities.
• Entities that function in natural resources extraction business in the country provided that the particular entity meets the list of conditions under Article 7 of the law that dictates the corporate tax
• Businesses that deal with non-extractive fields in the natural resources within the country are also exempted from taxation provided that they meet the conditions set under Article 8 of the corporate taxation law.
• Entities that function in the field of public benefit, provided that they satisfy the conditions laid down under Article 9 of the federal-decree law that identifies corporate taxation in the country.
• Entities that function as investment funds within the UAE, considering that such entities meet the requirements within Article 10 of the corporate tax law.
• If an entity deals with social security funds or public pension funds within the UAE, then they are also exempted from the taxation rules. However, regulatory monitoring of such entities will be carried out by the respective authorities in the country.
• Exemptions are also available for any business incorporated within the United Arab Emirates that is fully owned and controlled by an individual that meets the conditions as laid down in paragraphs (a), (b), (f), and (g) of the Clause 1 within the Article 4 of the federal-decree law.

Apart from the list described above, more categories of businesses and individuals may be exempted from the Corporate Tax law, as per the consideration and decision by the UAE Cabinet of Ministers.

When it comes to income tax on individual earnings, there are no taxes applicable currently in the UAE. Thus, if you are an individual and do not conduct any business in the country, then you are not subjected to any kind of taxes.

Corporate Income Tax is a globally accepted and implemented procedure. Just like elsewhere in the world, the additional revenue generated by the country through corporate taxes will further assist the United Arab Emirates to accelerate the growth plans that the leadership of the country has set to take the country and its people to the next generation.