_UAE's Corporate Tax: Is Your Business Ready for the Shift?

The UAE's tax-free status haven has attracted businesses and investors, fuelling economic growth. Abu Dhabi and Dubai, the biggest draw for investors from the UAE's seven emirates, are home to thousands of companies that have set up regional offices. However, there's been a change lately.

January 18, 2024

On December 9, 2022, the UAE's Ministry of Finance introduced Federal Decree-Law 47 of 2022, also known as the Corporate Tax Law.

The Taxed and the Tax-Free: Who's Affected?

Let's get to the core of it. Businesses in the UAE earning over Dh375,000 (S$102,110) annually are now in the corporate tax game. According to the Federal Tax Authority (FTA), Corporate Tax is imposed on Taxable Income at the following rates:

0% (zero percent) on the portion of the Taxable Income not exceeding AED 375,000.
9% (nine percent) on the portion of the Taxable Income exceeding AED 375,000.

First, your business must register and obtain a tax registration number from the Federal Tax Authority (FTA). Remember that companies liable for corporate tax must submit their tax returns within nine months of their fiscal year-end.

Exemptions and Tax Benefits

Specific sectors and entities can heave a sigh of relief as they remain tax-exempt. This includes government entities, public benefit entities, and investment funds. Moreover, wholly owned and controlled entities supporting exempt individuals can enjoy favourable tax benefits.

UAE vs. the World

Comparing the UAE's 9% corporate tax rate globally shows its competitiveness. EU nations average a 21.3% rate, OECD countries 23.04%, and the G7 nations a 26.7% rate, per the Tax Foundation in Washington. Over the past four decades, global corporate tax rates have plummeted from over 40% to 25% to 30%, according to the Tax Foundation.

The UAE's Corporate Tax Law presents opportunities and challenges. It can attract investments, enforce fiscal discipline, and impose financial obligations and administrative demands. Businesses must assess the impact, factoring in size, industry, and global tax strategy. Seeking professional tax counsel is crucial for compliance and tax optimisation.