Why Is UAE Implementing Corporate Tax From 2023

The What, Why and How of Corporate Tax. 

Federal Tax on Corporate Revenues will be applicable in the UAE starting the financial year June 2023. All companies will be liable to pay a standard rate of 9%  only when income topped Dh375,000 ($100,000), which will help the country’s economy grow substantially in the next 3-5 years. 

What is corporate tax?

CorporateTax is a well-known term for accounting firms in Abu Dhabi, like ours. In simple words, a corporate tax is the taxes on the profits of a corporation which is imposed annually in most countries, but UAE will be imposing this from 2023. According to a statement made by the UAE Government, this law will be imposed on all businesses, apart from ones exploiting natural resources and firms in the free zone won’t be affected as long as they don’t conduct business with the mainland.

Why is the UAE imposing Corporate Tax?

Our Firm’s best Tax Consultants in Abu Dhabi believe that the Corporate Tax can help benefit the UAE’s economy in more ways than one. Listed below are some of the prominently known reasons:

  • Boost UAE’s presence in the global commercial sector.
  • Avoid Fraud activities and achieve international trade transparency.
  • Accelerate UAE’s development and improve its standing in the global market.

What are the key takeaways from this motion?

  • If a firm in UAE earns Capital Gains and Dividends, its shareholdings will not be subjected to the UAE Corporate Tax Law.
  • Foreign Tax will be credited against corporate tax in UAE.
  • Businesses will be liable to submit only one corporate tax return at the end of every financial year. 
  • Foreign Investors that do not conduct business in the Mainland will be exempt from this law. 
  • Generous loss transfer and utilization rules will be made available to businesses in the UAE.
  • Intragroup transactions will be exempt from the Corporate Tax Law.

While personal income tax has not been implemented in UAE as of yet, the country’s need for corporate tax showcases potential growth in their economy in the coming few years. This rule will help UAE compete as well as align itself with global companies and investors. 

If you have any questions or concerns about this new rule, you can click here to contact us and as an accounting firm in Abu Dhabi, our Team of Experts will be happy to assist you. 


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