UAE Raises Corporate Tax from 9% to 15%

Summary (200 words)

The UAE Ministry of Finance has introduced a Federal Corporate Tax (CT) effective for financial periods starting in June 2023, marking a major change in the nation’s tax framework. The tax aligns with the OECD’s Base Erosion and Profit Shifting (BEPS) initiative and its proposed 15% global minimum tax rate. It applies to all UAE businesses and commercial activities, with exemptions for natural resource extraction, free zone businesses that comply with regulatory requirements and avoid mainland operations, and personal investments. The CT structure imposes a 0% rate on taxable income up to AED 375,000 and a 9% rate on income above that threshold, with a separate rate for large multinationals earning over EUR 750 million globally. Key features include exemptions for qualifying capital gains and dividends, provisions for carrying forward losses, and no withholding tax on domestic or cross-border payments. The regime permits tax grouping, allowing UAE group companies to file a consolidated return, and requires compliance with OECD Transfer Pricing Guidelines. Implementation mandates business registration and annual electronic filing, along with provisions for foreign tax credits and group filing options. Overall, this framework signifies evolution in the UAE’s tax system, requiring businesses to adjust for the new regulatory environment.