Abu Dhabi: Companies in the UAE will have to pay a 9 per cent corporate tax on profits exceeding Dh375,000 starting next year, it was announced on Friday.
Profits at or below that level will remain untaxed to support small businesses and startups.
According to Federal Decree-Law No. 47 of 2022 on Taxation of Corporations and Businesses, companies will become subject to UAE corporate tax from the beginning of their first financial year that starts on or after June 1, 2023.
The Ministry of Finance said the law is a key milestone in building an integrated tax regime that enhances UAE’s global economic competitiveness, and the Dh375,000 threshold is in recognition of the vital role that startups and small businesses play in the UAE's economy.
No tax on salaries
Corporate tax will not be applied to salaries or other personal income from employment, whether it is earned from work in the government, semi-governmental or private sector. Interest and other personal income earned from bank deposits or savings programmes are also not subject to corporate tax, along with investment in real estate by individuals in their personal capacity.
The law has also exempted companies in some sectors from their tax liability.
“Natural resource extraction activities in the country are exempt from corporate tax. However, they remain subject to existing local emirate-level taxation. Other exemptions are available to organisations such as government entities, pension funds, investment funds and public benefit organisations due to their vital importance and contribution to the social fabric and economy of the UAE,” a statement said.
Existing free zone entities, too, “will be eligible to benefit from a 0 per cent corporate tax rate on qualifying income”.
Additionally, the tax regime provides generous relief for intra-group transfers and restructurings, and allows group companies to use each other's available tax losses.
The corporate tax law reflects the UAE's support for the OECD’s Inclusive Framework on Base Erosion and Profit Shifting in its commitments to introducing a global minimum tax for multinationals, enhancing tax transparency and preventing harmful tax practices.