On Thursday, the United Arab Emirates began implementing the tax, as part of its effort to boost non-oil revenue while maintaining its position as a regional trading hub.
And the Ministry of Finance said in new regulations it issued today, Thursday, that qualified entities in over 30 UAE free zones, and exported goods worth tens of billions of dollars to neighboring countries, will be subject to a zero percent tax. even when it comes to dealing with the state in strategic activities such as manufacturing and processing, goods and logistics.
Responding to a media question about whether tax exemptions would encourage companies to move to free zones, Shabana Aman Khan, Executive Director of Tax Policy at the Ministry of Finance, said: “The system is designed to ensure the prosperity of strategic sectors in free zones.” “Some level of migration may occur, but the overall objective is to ensure that the UAE remains attractive,” she added.
The government claims to have adopted the corporate tax in line with international efforts to combat tax evasion, as well as to meet the challenges posed by the digitalization of the global economy. The United Arab Emirates does not impose personal income taxes.
The countries of the Gulf Cooperation Council have gradually begun to adopt tax reforms, having generally relied on the financing of their budgets by hydrocarbon revenues. In 2017, the Council approved the adoption of value added tax.
The UAE’s 9% rate on corporate income over 375,000 dirhams (about $100,000) is the lowest in the GCC, except for Bahrain, which does not impose tax general about corporations.
According to consulting firm PricewaterhouseCoopers (BWC), Saudi Arabia imposes a 20% tax, Qatar 10% and Kuwait 15% on foreign companies, and Oman applies a 15% corporate tax.
Mohammed Rasool, CEO of Amana, a UAE-based mid-sized financial services company, said in a report to Reuters that the corporate tax is a natural step for the UAE to keep pace with best practices in the world. world.
“It will be essential to ensure that the economy remains competitive both regionally and globally…But let’s be clear, the tax rate does not seem very high, especially compared to what companies have to offer elsewhere around the world,” he added.
From today, Thursday, companies will be subject to corporation tax at the start of their financial year, meaning the impact on tax revenue will not be tangible until 2025.
The tax imposed by the United Arab Emirates coincides with a new global minimum corporate tax set by the Organization for Economic Co-operation and Development and ratified by 136 parties, including the United Arab Emirates, to ensure that large companies pay at least 15% of their income and earn more difficult tax evasion.
UAE law imposes a zero percent tax on corporate income below 375,000 dirhams and nine percent on corporate income above this limit, with exemptions for low earners and no tax on corporations. personal income from employment, investment and real estate.
“They wanted to make it as friendly as possible to small and medium enterprises and start-ups. At the same time, they don’t want to encourage companies to leave the UAE,” said Wassim Shaheen, head of the unit of the Corporation tax. at KPMG Audit and Consulting Services, told Reuters.
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