UAE has just announced that a corporate tax of 9% will be implemented from 1st June 2023.
Implementation of corporate taxation in the UAE is something we had mentioned in the past as well. Now we have some more information that we can discuss further about the corporate tax in UAE and our thoughts about the same.
Like the other recent changes in the laws, UAE plans on improving the business in UAE to international standards. Bringing in taxation allows for improved global transparency and prevents harmful tax practices, accelerate UAE development and transformation objectives as well as cement UAE as leading business and investment hub.
1) Individuals are not subject to taxes. What this means is that personal income tax is not going to be implemented. Income on salary, real estate, investment in shares, and other personal income that do not relate to UAE trade or business will not be taxed.
Individuals do not need to be concerned with the new taxation system being implemented as long as the income is not earned from trade or business in the UAE.
2) No corporate tax in UAE for certain types of transactions.
3) If a company is taxed in a foreign jurisdiction, the tax paid can be deducted towards the tax owed within the UAE.
4) Another key feature of the corporate tax in UAE is that there will be some generous loss transfer and utilization rules. This will be especially beneficial for start-up businesses whose first few years may be under a loss.
5) Withholding taxes are not currently planned to be implemented. Withholding transactions mainly impacts transactions where suppliers outside UAE invoice companies in the UAE.
Implementation of corporate taxation in the UAE will bring some more structure to the businesses in the UAE. We will have to wait for the Ministry of Finance to give more information on the new tax system to better plan ahead and make sure the companies are ready for the implementation and to be fully compliant.