Gately published a good summary of the introduction in the UAE of Corporation Tax. Additionally, I have attached an overview of the routes to residency in the UAE.
Federal Decree Law No. 47 of 2022 on taxation of corporations and businesses (Corporate Tax Law) has recently been issued and provides, inter alia, that certain categories of business in the UAE shall be required to pay corporate tax at the proposed rate of 9% from 2023. This is in addition to the general VAT duty of 5% on products and services.
Under the Corporate Tax Law, the government will levy a rate of 9% on a company’s taxable profits exceeding AED 375,000. Corporate tax will be charged on profits for financial years calculated from June 1, 2023. An entity that has a financial year starting on July 1, 2023 ending on June 30, 2024 will be subject to corporate tax from July 1, 2023. Alternatively, the UAE government has indicated that a business with a financial year starting on January 1, 2023 and ending on December 31, 2023 will be subject to tax from January 1, 2024.
The UAE Government has stated that corporate tax will not be levied on salaries or personal income from employment, as well as earnings made from bank deposits, savings schemes and/or real estate investments made by individuals. Also excluded from the corporate tax coverage are “natural resource extraction activities” in the UAE – the exact definition is yet to be clarified. However, entities engaged in these activities are still subject to existing local taxation and VAT.
Other organisations, including government entities, pension funds, investment funds and public benefit organisations will also be exempt under the current law. Free trade zone entities will also be eligible (in certain cases only) to get a zero-tax rate, however the UAE Government has not yet set out the full details. Dividends and capital gains earned by a UAE company from qualifying shareholdings appear also to be tax-free.
Local and international tax advice should be taken to ensure tax and regulatory compliance.