The UAE’s Corporate Tax | Federal Decree-Law No. (47) of 2022 

The United Arab Emirates (UAE) issued Federal Decree-Law No. (47) of 2022, known as the “Corporate Tax Law,” on December 9, 2022. This legislation establishes the framework for the implementation of a Federal Corporate Tax (“Corporate Tax”) in the UAE, applicable for financial years commencing on or after June 1, 2023. The introduction of Corporate Tax aligns with the UAE’s strategic objectives, aiming to expedite its development and transformation. The establishment of a competitive Corporate Tax regime, following international standards and supported by the UAE’s extensive network of double tax treaties, solidifies the UAE’s position as a premier jurisdiction for business and investment. 

Strategic Objectives and International Standards 

The UAE has long been recognized as an international business/trade hub and a global financial centre. The implementation of the Corporate Tax regime is designed to further enhance the UAE’s reputation by incorporating globally recognized best practices and principles. This approach ensures that the Corporate Tax system in the UAE is transparent, easily comprehensible, and aligns with internationally accepted norms. By adopting such measures, the UAE aims to create a business environment that is conducive to growth, innovation, and foreign investment. 

Imposition of Corporate Tax 

Regarding the imposition of Corporate Tax, it will be levied on Taxable Income at rates specified in Article 3 of the Corporate Tax Law. The Corporate Tax rates are imposed as follows: 

• 0% (zero per cent) on the portion of Taxable Income not exceeding AED 375,000  

• 9% (nine per cent) on Taxable Income exceeding AED 375,000 

Corporate Tax Rates for Qualifying Free Zone Persons 

The UAE’s Corporate Tax regime also includes specific provisions for Qualifying Free Zone Persons, ensuring that the tax system is equitable and takes into account the unique status of free zones within the UAE. The rates for Qualifying Free Zone Persons are as follows: 

• 0% (zero per cent) on Qualifying Income, subject to certain conditions. 
• 9% (nine per cent) on Taxable Income that does not qualify as Qualifying Income under Article 18 of the Decree-Law and as specified in any Cabinet decision made at the Minister’s suggestion in this regard. 

Conclusion 

The introduction of Federal Decree-Law No. (47) of 2022 marks a significant milestone in the UAE’s economic development. By establishing a Corporate Tax regime that aligns with international standards, the UAE demonstrates its commitment to fostering a competitive and transparent business environment. As businesses and investors navigate the new Corporate Tax landscape, the UAE’s strategic position as a global financial centre and business hub will be further strengthened, driving continued growth and investment in the region. 

Summary

On December 9, 2022, the UAE introduced Federal Decree-Law No. (47) of 2022, establishing a Federal Corporate Tax regime effective from June 1, 2023. This move aligns with the UAE’s strategic objectives to enhance its business environment and attract international investment. The Corporate Tax rates are set at 0% for taxable income up to a specified threshold and 9% for income exceeding that threshold. Qualifying Free Zone Persons enjoy a 0% rate on qualifying income and 9% on non-qualifying income. 

Disclaimer:  The Content offers general guidance and should not be considered legal, financial, or tax advice. Consult qualified professionals for personalized guidance. While efforts have been made to ensure accuracy, no guarantee is provided for completeness or applicability to individual situations. Users are responsible for their interpretation and actions based on this information, at their own risk.  

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