UAE: Corporate income tax, what to expect

A new federal corporate income tax system will be implemented in the UAE

A new federal corporate income tax system will be implemented in the UAE

The Ministry of Finance on 31 January 2022 made a breakthrough announcement that a new federal corporate income tax system will be implemented in the UAE, effective for financial years commencing on or after 1 June 2023.

The UAE will introduce a standard corporate income tax rate of 9%, and the corporate income tax regime is being designed to incorporate best practices globally and minimize the compliance burden on businesses.

Background

In the past few years, the UAE experienced significant tax changes with a view to streamline its tax system and bring it in line with international best practices, while also diversifying its revenue. Starting with the implementation of a value added tax (VAT) in January 2018, followed by the introduction of economic substance rules as well as country-by-country (CbC) reporting regulations in April 2019, the UAE has been through a series of tax reforms in the last few years to align itself with international markets and diversify its revenue.

Corporate income tax

The new corporate income tax law is expected to levy corporate income tax on business profits made by UAE businesses, over the course of a tax accounting period.

Text and details about the corporate income tax law are expected to be issued in mid-2022.

As businesses await further guidance, they may wish to consider the effects of the new corporate income tax law on their businesses and whether they are operationally ready.

Read more about the proposal on a dedicated corporate income tax webpage developed by the KPMG member firm in the United Arab Emirates.

 

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