Introduction of 9% corporate tax rate in the UAE

The United Arab Emirates has earned a reputation as a practically tax-free jurisdiction and, due to this, continues to attract businessmen from all over the world. The news about the introduction of a corporate tax at the level of 9% stirred up the business world, because the previously tax-free jurisdiction introduces a tax on company profits.

But let’s see if it’s that bad.

The introduction of new taxes is never a holiday for entrepreneurs, but you need to take into account the nuances, namely the rate of 9%. This is an incomparably low rate among all non-offshore jurisdictions. In addition, the tax will only be levied on companies that have exceeded the limit of 375,000 AED (about 102,110 USD). Also, companies registered in free tax zones, as a rule, are exempt from paying taxes for 50 years.

The Ministry of Finance has confirmed that the new UAE corporate tax regime will continue to take into account the corporate tax relief currently offered to free zone businesses that comply with all regulatory requirements and do not conduct business in the UAE mainland.

Thus, it can be concluded that companies in the free zone will enjoy a zero corporate tax regime and will be subject to corporate tax at a rate of 9% only on profits derived from the mainland of the UAE.

This is an important point that will allow the UAE to maintain a favorable tax environment and investment attractiveness.

The change is expected to come into effect from June 2023.