UAE to collect 9% corporate tax from companies

Tax not applicable on individuals’ salaries or their income from employment, says report

The United Arab Emirates (UAE) on Friday issued a corporate tax law, under which a nine per cent tax rate will be applicable on companies posting a profit of above 375,000 dirhams, Khaleej Times reported.

The tax will be applicable to firms in the UAE starting with the fiscal year that begins on or after June 1, 2023.

The threshold of Dh375,000 has been included in order to support small and medium enterprises, and startups and make the economy more competitive.

Importantly, the report stated, the corporate tax will not be applied to individuals’ salaries or their income from employment. In addition, personal income earned from bank deposits or savings programmes and investments in real estate by individuals in their personal capacity are also not subject to the tax, it added.

UAE's finance ministry said that the move will help build an integrated tax regime to enhance the country’s global economic competitiveness and support international financial systems within the framework of the UAE’s established partnerships.

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According to the law, free zone companies in UAE which fulfil all conditions specified in the Executive Regulations of the UAE Corporate Tax Law will be exempted from the corporate tax.

Natural resource extraction activities are also exempted but they’re subject to existing Emirate-level taxation, the report stated.

Government entities, pension funds, investment funds and public benefit organisations are also beyond the scope of corporate tax.

The corporate tax shall be imposed on taxable persons which includes residents, certain non-residents and free zone persons generating profits of over Dh375,000 per annum.

The non-residents are also subject to nine per cent of tax if they have a permanent establishment in UAE as well as income from the sale of goods, provision of services etc. in the country.

All taxable persons shall be obligated to maintain records and documents for seven years following the end of the tax period.

Under the law, the report further said, annual corporate tax returns will be required to be filed by all taxable persons no later than nine months from the end of the relevant tax period.