UAE 9% corporate tax one of the lowest in the world

The UAE’s decision to levy a nine per cent tax on corporate profits from June 2023 is highly attractive as well very competitive at the same time as it’s one of the lowest in the world.

Senior officials of the small and medium-sized businesses in the UAE told Khaleej Times the new tax regime will bring more transparency and also make the corporate balance sheets stronger.

According to Tax Foundation, three countries — Bangladesh, Argentina and Gibraltar – increased their corporate income tax rates while 17 countries reduced their corporate tax rates in 2021. Comoros, Puerto Rico and Suriname have the highest corporate tax rates in the world at 50 per cent, 37.5 per cent and 36 per cent, respectively. While Barbados, Uzbekistan and Turkmenistan levy the lowest corporate tax at 5.5 per cent, 7.5 per cent and 8.0 per cent, respectively.

Globally, the worldwide average statutory corporate income tax rate, measured across 180 jurisdictions by Tax Foundation, is 23.54 per cent.

Ayman Youssef, Vice President, Coldwell Banker, UAE, said the corporate tax rate is an attractive rate on a global scale and there will be no taxes levied on personal real estate investment.

Exemptions

Dhaval Jasani, founder, CEO of ZTI Global Consulting, said the UAE corporate tax regime will continue to honour the corporate tax incentives currently being offered to free zone businesses that comply with all regulatory requirements and that do not conduct business with mainland UAE.

“Similar to VAT, corporate tax will also have Group Taxation regime, as clarified by Ministry of Finance, while we await to interpret provisions in the legislation, once the legislation is published. UAE entities will have to comply with Transfer Pricing rules and requirements, in reference to the regulations to be published and OECD transfer pricing guidelines. As of now, we do not see any exemptions for startups apart from taxable income of Dh375,000 that would not be subjected to corporate tax. We will have to wait for the legislation to evaluate if any exemptions are being granted to startups,” said Jasani.

Bal Krishen, chairman and CEO, Century Financial, said the UAE corporate tax regime has been designed to minimise the compliance burden on businesses.

“In addition to the UAE’s extensive network of double tax treaties, the new regime will strengthen the UAE’s status as a world-leading hub for business and investment. As a result of the new corporate tax, the UAE has reaffirmed its commitment to complying with international standards for tax transparency and preventing harmful tax practices,” he said.