UAE introduces first-ever tax on business profits
The tax, which was spurred by the Organization for Economic Cooperation and Development, will not apply to profits below a certain threshold in an effort to support small businesses.
The United Arab Emirates announced for the first time today a tax on business profits.
The UAE Ministry of Finance said the "federal corporate tax on business profits” will come into effect for fiscal years after June 2023. Profits will be taxed at a rate of 9%. However, the tax rate will be 0% for profits below 375,000 Emirati dirhams ($102,000). The latter rate aims to “support small businesses and startups,” the ministry said in a press release.
The tax was inspired by the Organization for Economic Cooperation and Development’s Base Erosion and Profit Shifting project. The initiative by the Paris-based intergovernmental economic body aims to support international cooperation on reducing tax evasion.
The introduction of the tax constitutes a major fiscal shift for the UAE. The Gulf state does not have a corporate tax rate at present, which is a major reason so many international companies are based there.
