UAE: Will Residents Have To Pay 9% Corporate Tax On Their Salary From Next Year?

UAE is planning to charge nine percent corporate tax (CT) from June 2023. Businesses that earn above $102,000 are mandated to pay corporate tax as the government is trying to lend a helping hand to small companies and startups. The law regarding Corporate Tax was released last week and compared to the minimum limit of fifteen percent, UAE corporate tax is fixed at nine percent as of now.

the government released the law last week

Corporate tax is also charged on the profit made by companies and not on the total turnover which makes it a more business-friendly tax and this is not applicable for individuals who earn a salary above $102,000. This is a corporate tax levied only for companies and business institutions that work under a corporate structure.

This is also applicable for any sort of managerial incentives paid to business owners as these are also treated as expenses for the business. If this crosses a particular limit and a huge amount of money is being paid then that amount also will be considered taxable under CT.

Other types of personal income like interests earned from deposits, savings programs, or real estate investments also won’t be charged under the corporate tax. Oil extraction and other natural extraction companies are exempted from the tax, as are free zone trading companies that satisfy the conditions recommended by the Executive Regulations of the UAE Corporate Tax Law.

Both residents and non-residents come under the purview of the CT if they have a successfully running corporate establishment that is creating profits above the taxable threshold. It is also to be noted that all taxable amounts should be well documented and maintained up to seven years after the end of the tax period. The annual corporate tax should be paid within nine months from the end of the yearly tax period.  

The decision to levy corporate tax comes at a time when UAE is expanding its economic structures to become a non-oil economy in the future. This is possible only through creating multiple channels of income from other economic sources and taxes are an efficient method for this. All this while, business owners, startups, and investors were keen on building their hub in UAE because of its non-taxation policies.

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However, even with the introduction of corporate tax, the rate of tax and the relaxations given to small-time business initiatives still make UAE a safe haven for business and investments. Other Gulf countries like Saudi Arabia and Qatar had already introduced Corporate taxes. UAE started charging Value Added Tax (VAT) in 2018 and this was the first step towards diversifying the economy to a world-class structure.

These new shifts would steer UAE’s GDP to a non-oil economy that aims to create opportunities and investments in tandem with a globally competitive market. The current GDP growth of the UAE has been very encouraging as the branching efforts of the nation have begun to see convincing results. More investments, tech startups, resident visas, real estate growth, tourism boom, etc. have been taking UAE and its emirates to new horizons.

Expats and citizens are enjoying a higher standard of living and better overall facilities as the public and private sectors in the UAE are working towards the vision of Sheikh Mohammed bin Rashid Al Maktoum. Together with economic growth, UAE also aims at becoming a completely sustainable zero-emission economy.

The efforts for reducing carbon footprint and embracing green energy resources were started years ago and in 2022, UAE is seen as one of the pioneers in sustainable development and zero emission strategies. In the coming years too, UAE has pledged to continue its efforts to become a model society and economy that is built on mutual trust, innovation, and peace.