On 31 January 2022, the United Arab Emirates (UAE) Ministry of Finance (MoF) announced the introduction of a Corporate tax (CT) in the UAE that will be effective for financial years starting on or after 1 June 2023.
The new regime, which is set to be introduced from 1 June 2023, introduces standard statutory tax rate of 9% and a 0% tax rate for taxable profits up to AED 375,000 to support small businesses and startups.
Given the position of the UAE as a global financial centre and an international business hub, the UAE Corporate Tax regime will support investment and headquarters activities and ensure the free flow of capital, trade, financing, and services.
On 26 July 2021, the Ministry of Finance issued an official statement confirming the UAE’s support of the global minimum effective tax rate as proposed under “Pillar Two” of the OECD Base Erosion and Profit Shifting project. The introduction of a UAE Corporate Tax regime will provide a basis for the UAE to execute its support by applying a different Corporate Tax rate to large multinationals that meet specific criteria set with reference to the above initiative.
Businesses will have ample time to prepare for the introduction of Corporate Tax, and further information on the UAE Corporate Tax regime will be provided towards the middle of 2022 to help businesses get ready and be fully compliant. Details on the proposed CT regime are set out in the Frequently Asked Questions (FAQs) published on the website of the Ministry of Finance.
