What will be the impact of Corporate Tax in UAE 2023?

The UAE [United Arab Emirates] is a country likened to El Dorado as stories tell it. A place of gold that signifies wealth and all shades of royalty. Perhaps not in the literary context, but the understanding that once one is in the land, and you explore diligently, you would not know lack. 

The UAE has had a tactical approach to its growth process from years past. While we could celebrate the precious black gold being a blessing to its wealth, the UAE has shown open arms to business ideas, investors, and creatives in diverse spheres, which in the process of lenient procedures for ex-pats and citizens, providing favourable policies and most importantly no VAT [Value Added Tax] until 2018, when introduced has made the UAE indeed an El Dorado. 

Great minds always see the future, right?  

This usually lies the tale of visioners, especially when they launch out new ideas. Just like the year 2018 when the government of UAE decided on charging VAT, the UAE announced on 31st January 2022 through the Ministry of Finance that for the first time in the UAE, a federal corporate tax regime will be implemented. 

According to Wikipedia, a corporate tax, sometimes known as a corporation tax or a business tax, is a type of direct tax levied on the profits or capital of companies or similar legal organizations. Many nations levy such taxes at the national level, and a state or municipal level may levy a comparable tax. 

Before now, the companies in the UAE were not obligated to pay a corporate tax which is a necessity in most advanced countries like the UAE. However, a newly enacted law announced by the Ministry of Finance says that the corporation tax would be imposed on all UAE firms and commercial operations carried out by legal organizations or people in all seven emirates starting from June 2023. It is further said that natural resource exploitation will continue to be subject to a company tax imposed at the emirate level. 

Companies and organizations in the UAE are not taxed on income or corporation, asides from the VAT which comes in from other services.  

Just like every good story has its end, companies will be passed corporate tax from June 2023 respectively. 

Owning that the city of Dubai has seen different weather of growth since its years of independence from its aquarian culture to a megacity as fondly called by many. Dubai has experienced an income tax decree which was first published in 1969 and then revised in 1970 based on the French principle of territoriality. So, yes corporations pay taxes in Dubai. Going by the tax decree, any individual who conducts trade or business in Dubai is subject to corporate income tax at progressive rates of up to 55%, according to the law. 

Dubai corporate tax is a requirement by the government for organizations and business brands to pay a certain percentage of their earnings over a period. 

The tax decree set in Dubai would no longer hold after the newly passed law on corporate tax in the UAE will be effected on June 2023, and override that of Dubai corporate tax. 

Dubai is a beautiful city to live in and enjoy your proceeds, especially if you are a business owner and you operate under the free trade zone. It is often called a tax-free city. However, for organizations operating away from the trade zones, this may not be the same here.  

Dubai is a tax haven, with no income tax for both legal and natural individuals. There is no such thing as a personal income tax or a corporate profit tax for legal entities.  

Dubai is often regarded as the world's most tax-friendly jurisdiction for this reason. 

 

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