RIYADH: The UAE has announced a new 9 percent corporation tax will be levied on businesses from June 1 2023.
Businesses will become subject to the tax from the beginning of their first financial year that starts on or after June 2023.
A 9 percent rate will kick in on profits above 375,000 dirhams ($102,096).
“As a leading jurisdiction for innovation and investment, the UAE plays a pivotal role in helping businesses grow, locally and globally,” said Younis Haji Al Khoori, undersecretary of the Ministry of Finance.
He added “The certainty of a competitive and best in class corporate tax regime, together with the UAE’s extensive double tax treaty network, will cement the UAE’s position as a world-leading hub for business and investment.”
The UAE is following other Gulf Cooperation Council countries in adopting corporate tax regimes, with five out of six GCC countries now opereating the levy.
Following the UAE, Qatar has the second lowest corporate tax of 10 percent, followed by Oman and Kuwait with 15 percent. Saudi Arabia possesses the highest corporate tax rate of 20 percent.
On a broader scale across the Middle Eastern region, Egypt has a standard corporate income tax of 22.5 percent, with companies engaged in the exploration and production of oil and gas taxed at a rate of 40.55 percent. Lebanon imposes a 17 percent and Libya 24 percent.
The relatively low-rate of the levy in the UAE means its reputation as a low tax country will not be threatened, and Khatija Haque, chief economist at Emirates NBD said: "The UAE continues to make progress in diversifying its budget revenue away from oil, and a corporate tax fits into this strategy. The tax rate remains low by global standards."
In 2018, the UAE introduced value added tax on most goods and services at a standard rate of 5 percent. The UAE imposes a 20 percent tax on branches of foreign banks operating in the country, and on companies with concession agreements in the oil and gas sector of up to 55 percent at the emirate level.
Businesses in the UAE are exempted from paying taxes on capital gains and dividends received from shareholdings, the ministry said.
The new programme left intact the exemption for individuals from income tax, capital gains tax on real estate and other investments, and other earnings that do not come from a business.