The new UAE corporate tax 2023
Published at: 05/06/2023 11:47 am
The United Arab Emirates rolled out a 9% business tax (corporate tax), but there are exemptions for the companies registered in the tax-free zones.
The new business tax follows the 5% VAT (Value Added tax) introduced in 2018 as the oil-rich Emirates wants to become an international tourism and trade centre of the wealthy.
According to the Ministry of Finance, the qualifying companies registered in one of the more than thirty tax-free zones will be subject to a 0% UAE business tax, even if they do business with the mainland. Important to note that the exemption includes companies with manufacturing, goods processing or logistics services.
Please, note that the United Arab Emirates 9% new tax rate on income above 375,000 dirhams (more or less 100,000 USD) is still the lowest among the Gulf countries, except for Bahrain, which does not impose any corporate tax. Firms from the end of May 2023 will become liable for corporate tax when their financial years start, meaning tax returns will not fall due until 2025.
What are the advantages of the United Arab Emirates as a tax paradise?
- Personal Income Tax Exemption: Individuals working within the free zones are exempt from personal income tax. So, employees and business owners can enjoy tax-free income from their activities within the free zones.
- Customs Duty Exemption: Businesses in UAE's free zones benefit from exemption or reduced customs duties on imports and exports. The Emirates allows companies to import goods, raw materials, and equipment without paying significant customs duties, making it more cost-effective for businesses.
- Capital and Profit Repatriation: Free zone companies can repatriate 100% of their money and profits outside the UAE. Moreover, businesses can freely transfer their earnings to their home country or any other international location without restrictions or taxes.
- No Currency Restrictions: UAE free zones allow businesses to operate in any currency. There are no restrictions on converting or transferring funds in and out of the country, providing greater flexibility for international business transactions.
- Simplified Financial Reporting: Free zone companies benefit from simplified financial reporting requirements. The reporting standards are often more streamlined, reducing financial compliance's administrative burden and cost.
- Strategic Location: The UAE's strategic location at the crossroads of Europe, Asia, and Africa makes it an ideal base for businesses targeting these regions. The free zones provide easy access to regional markets and have excellent transportation and logistics infrastructure.
What are the advantages of becoming a resident of the United Arab Emirates (UAE) in 2023?
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- Tax Benefits: The UAE is known for its favourable tax environment. It does not impose personal income tax on residents, meaning that individuals can retain more earnings. In most cases, there are also no capital gains taxes, wealth taxes, or inheritance taxes. Becoming a resident in the Emirates can significantly enhance an individual's financial position.
- Residence Visa: UAE residency provides individuals with a legal status to reside in the country for an extended period. A residence visa offers stability and security, allowing individuals and their families to live, work, and study in the UAE without frequent renewals.
- Business Opportunities: UAE residency can open up many business opportunities. As a resident, you can establish your own business or invest in existing ventures, taking advantage of the country's vibrant economy and strategic location. The resident status also allows you to participate in government tenders and contracts, expanding your business prospects.
- Access to Services: UAE residents can access various services, including quality healthcare, education, and utilities. The country's infrastructure is well-developed, providing efficient transportation networks, modern amenities, and a high standard of living.
- Family Sponsorship: UAE residency allows individuals to sponsor their family members, including spouses, children, and dependent parents, to join them in the country. The Emirates' regulations facilitate family reunification and ensure that loved ones benefit from the advantages of living in the UAE.
- Travel Benefits: UAE residency offers enhanced travel benefits, including the option to obtain a UAE passport. With a UAE passport, individuals gain visa-free or visa-on-arrival access to numerous countries worldwide, making international travel more convenient and hassle-free.
- Safety and Security: The UAE is known for its strong commitment to safety and security. As a resident, you can enjoy a peaceful and stable environment with low crime rates, ensuring high personal safety.
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