The Free Zone Corporate Tax regime offers a zero per cent Corporate Tax rate for qualifying businesses. Image Credit: Shutterstock

Abu Dhabi: The Organisation for Economic Co-operation and Development (OECD) posted their review results of preferential tax regimes, and rated UAE's corporate tax regime for free zones as 'not harmful'.

The UAE Ministry of Finance said in a press release following this update that the review underscores the UAE’s robust tax legislation and its alignment with international standards. The findings were disclosed in the results of the Forum on Harmful Tax Practices (FHTP) October 2023 meeting.

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The Inclusive Framework on Base Erosion and Profit Shifting (BEPS) Project approved these results on February 5.

This rating is part of the OECD’s comprehensive review of 322 taxation regimes worldwide under the BEPS Project to date. According to the findings, the UAE’s Free Zone Corporate Tax regime was evaluated and confirmed to align with the global initiative to prevent tax avoidance and harmful tax practices.

Mohamed Hadi Al Hussaini, Minister of State for Financial Affairs, said: “The OECD rating of ‘non-harmful’ is a testament to the UAE’s commitment to transparency, non-harmful taxation, and the implementation of best practices in tax policy. This new status marks a significant milestone in the UAE’s journey towards solidifying its position as a leading global hub for business and investment. It not only enhances our competitiveness on the global stage but also affirms the international community’s confidence in our corporate tax system and provides certainty to investors.”

Al Hussaini added, “Our adherence to international tax standards, coupled with the OECD’s recognition, reinforces our dedication to fostering a sustainable and dynamic economic environment. The Ministry of Finance remains dedicated to further refining our nation’s tax framework, ensuring it supports the country’s vision of economic diversification and development.”

UAE Corporate Tax

The UAE introduced its nationwide corporate tax regime in 2023 as a strategic move designed to accelerate the UAE’s development and transformation, aligning with its long-term strategic objectives to diversify its economy.

The corporate tax was designed to cement the UAE’s position as a leading global hub for business and investment, accelerate its development and transformation to achieve its strategic objectives, reaffirm its commitment to meeting international standards for tax transparency and preventing harmful tax practices.

As per the Ministry of Finance, corporate tax rates are 0 per cent for taxable income up to Dh375,000 (approximately USD100,000) and 9 per cent for taxable income above Dh375,000.

The Free Zone Corporate Tax regime offers a zero per cent Corporate Tax rate for qualifying businesses and reflects the continued significant role of free zones in the UAE’s economic diversification strategies and commitment to align with international taxation standards.