The UAE has taken a significant step towards securing its economic future by implementing a federal corporate tax, as outlined in Federal Decree-Law No. (47) of 2022. This strategic move aligns the UAE with international tax standards and positions it as a competitive global financial and business hub.
The new taxation framework, developed through extensive benchmarking and impact assessments, includes a digital consultation phase to ensure public participation. It covers the UAE’s free zones, crucial components of its diversified economic structure and international investment appeal. The tax policy aims to boost the UAE’s growth as a global commerce and finance hub by facilitating the free flow of capital and business expansion.
Effective from June 2023, the corporate tax rate is set at 0 percent for annual taxable incomes up to AED375,000 and 9 percent for amounts exceeding that threshold. Transactions in free zones will continue to enjoy a 0 percent tax rate, highlighting the UAE’s competitive tax environment on a global scale. The OECD has recognized the UAE tax system as one of the top-tier systems worldwide, aligning well with the goals of the Base Erosion and Profit Shifting (BEPS) project.
The corporate tax plays a crucial role in sustainable development by establishing a reliable revenue base, advancing strategic objectives, and promoting tax transparency and fairness. The legislative framework and regulatory decisions have been carefully crafted to enhance societal, environmental, and fiscal well-being in collaboration with the Federal Tax Authority.
Sustainable development goals are at the core of the UAE’s vision for the future, as evidenced by the establishment of the National Committee for Sustainable Development Goals in 2019. This committee oversees the implementation and progress of sustainable development goals on a national scale, engaging stakeholders and reporting regularly on the UAE’s progress in aligning these goals with its development priorities.
The UAE has been proactive in reforming tax policies to address growth challenges, enhance inclusivity, and support sustainable economic expansion. By broadening the range of taxable goods, simplifying the tax system, and updating regulations, the UAE aims to promote fair recovery and financial improvement. Additionally, the UAE’s commitment to the BEPS programme and the OECD’s Pillar Two initiative underscores its dedication to global tax fairness.
The introduction of a federal corporate tax system in the UAE is part of broader transformational projects aimed at strengthening the nation’s financial infrastructure and ensuring its resilience in the face of future challenges. This collaborative effort between the Ministry of Finance and the Federal Tax Authority is aligned with the UAE’s strategy to maintain its leadership in digital government innovation and financial sustainability.
Regulatory decisions accompanying the federal corporate tax law provide detailed guidance on its implementation, exemptions, tax registration requirements, and conditions for taxable entities in free zones. These decisions reflect the UAE’s commitment to creating a transparent, fair, and competitive tax environment that supports economic growth and positions the country as a global trade and investment hub.
The UAE Ministry of Finance is actively engaging with the business community to raise awareness about the new corporate tax law and its implications. Public awareness sessions and official communications aim to ensure accurate information dissemination and promote transparency in tax matters. The government’s commitment to transparency and information accuracy underscores its dedication to creating a conducive business environment in the UAE.