The UAE will introduce a federal Corporate Tax on business profits effective for financial years starting on or after 1 June 2023. The UAE Corporate Tax regime has been designed to incorporate best practices globally and minimise the compliance burden for UAE businesses.

Corporate tax is a form of direct tax levied on the net income or profit of corporations and other entities from their business. Corporate tax is sometimes also referred to as “Corporate Income Tax” or “Business Profits Tax” in other jurisdictions.

UAE Corporate Tax will apply to all UAE businesses, except for the extraction of natural resources, which will remain subject to Emirate level corporate taxation. Foreign entities and individuals will be subject to Corporate Tax only if they conduct a trade or business in the UAE in an ongoing or regular manner.

UAE Corporate Tax will apply equally to all categories of profits and other (net) income reported in the financial statements prepared in accordance with internationally acceptable accounting standards.

The following are the proposed corporate tax rates:

• A 0% tax rate applies to taxable income up to AED375,000
• A 9% tax rate applies to taxable income over AED375,000
• All multinational corporations subject to OECD Base Erosion and Profit-Sharing laws that belong within Pillar 2 of the BEPS 2.0 framework, i.e. combined worldwide revenues in excess of AED 3.15 billion will be entitled to varying rates