On 31 January 2022, the UAE's Ministry of Finance ("MoF") announced the much anticipated introduction of a federal Corporate Tax ("CT") on business profits under a prospective CT regime in the UAE.

The relevant legislation for the CT regime (UAE CT Law) is currently being finalised and will be subsequently promulgated. Once promulgated, the UAE CT Law will provide more details and guidance on several critical aspects.

The UAE CT regime will become effective for fiscal years starting on or after 1 June 2023 and is expected to be a federal level corporate taxation. Thus, all UAE businesses, corporations and entities engaged in and licensed to undertaken commercial activities shall be subject to the UAE CT. Businesses engaged in the extraction of natural resources will be exempt from the UAE CT and shall continue to be subject to Emirate level taxation. In general, the UAE CT Law shall be levied at a standard statutory tax rate of 9% of taxable income above AED 375,000. Additional provisions include:

  • The application of 0% rate on taxable income up to AED 375,000; and
  • A different tax rate for large multinationals that meet specific criteria set with reference to Global Minimum Tax rate under the "Pillar Two" of the Organisation for Economic Cooperation and Development (OECD) Inclusive Framework on Base Erosion and Profit Shifting ("BEPS IF").

SNG Grant Thornton is ready and able to assist new and existing clients with operation in the UAE to adapt to these proposed changes especially where these clients have commercial transaction structures, inter-company transactions or investment / holding structures in the UAE.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.