Starting from June 1, 2023, the United Arab Emirates will enforce a 9% corporate tax, becoming the fourth GCC country to adopt a federal corporate tax. This decision marks a significant change for the UAE, which has been a tax-free country for decades.

The introduction of this tax is aimed at strengthening the country’s position as a leading business and investment hub and to meet international standards for tax transparency. Corporate tax, referred to as Business Profits Tax or Corporate Income Tax, is a form of direct taxation that is imposed on the overall profits of corporations and other types of business organizations.

Companies with a taxable profit of more than 375,000 AED are required to pay a 9% corporate tax on their net profit. The calculation of the tax will be based on the net profit indicated in the company’s financial statements.

Small businesses and start-ups in the UAE will receive support through a 0% corporate tax rate on net profits up to 375,000 AED. Corporate tax in the UAE will not apply to individuals,
foreign investors not engaged in business activities within the country, as well as capital gains and dividends received by UAE companies from their qualifying shareholdings.

Additionally, corporate tax incentives are being offered to free zone businesses that comply with all regulatory requirements. In conclusion, the corporate tax law, which was released on
December 9, 2020, is now available for download on the Ministry of Finance website.