What is the corporation tax rate in Dubai in 2023?

If you are a business owner or an investor in Dubai, you might be wondering how the new corporate tax law will affect your profits and operations. In this blog post, we will explain the main features and implications of the corporate tax regime that will be introduced in the UAE from June 1, 2023.

The UAE has been known for its attractive tax environment, with no federal corporate tax on most businesses, except for those engaged in oil and gas production and certain financial activities. However, in January 2022, the Ministry of Finance announced that it will introduce a federal corporate tax on the net profits of businesses, as part of its efforts to diversify its tax revenues and align with international best practices.

The corporate tax law will apply to all businesses and individuals conducting business activities under a commercial license in the UAE, including free zone businesses. However, businesses engaged in the extraction of natural resources will remain exempt from corporate tax, as they will continue to be subject to the current emirate-level taxation.

The corporate tax rate will be 9% for taxable income above AED 375,000 ($102,000), which is among the most competitive in the world and will position the UAE as a leading global hub for business and investment. Profits below the threshold of AED 375,000 will be subject to a 0% tax rate, which will assist small and medium-sized businesses and startups.

The corporate tax law will also provide some exemptions and incentives for certain types of income and transactions, such as dividends, capital gains, intra-group transactions and reorganizations, provided that the necessary conditions are met. Additionally, corporate tax will not apply to individuals’ income from salaries, bank deposits, real estate investments, shareholdings and other securities.

The corporate tax law will take effect on June 1, 2023, for financial years starting on or after that date. Businesses will be required to register with the Federal Tax Authority (FTA), file annual tax returns and pay their tax liabilities within the specified deadlines. The FTA will be responsible for administering and enforcing the corporate tax law, as well as issuing guidance and regulations on its implementation.

The introduction of corporate tax in the UAE is a significant change that will have implications for businesses’ financial planning, accounting, compliance and reporting. Businesses should start preparing for the new tax regime by assessing their current and projected income sources, expenses, deductions and exemptions, as well as reviewing their legal structures, contracts and transactions. Businesses should also seek professional advice from qualified tax consultants and accountants to ensure that they comply with the corporate tax law and optimize their tax position.

The corporate tax law is expected to enhance the UAE’s economic development and transformation, as well as its reputation as a transparent and compliant jurisdiction. Businesses that adapt to the new tax regime will be able to benefit from the UAE’s strategic location, diversified economy, supportive infrastructure and business-friendly environment.

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