UAE corporate tax will be among the ‘lowest in the world’


The UAE corporate tax regime has been designed to incorporate best practices globally and minimize the compliance burden for businesses. In addition to the UAE’s extensive network of double tax treaties, the new regime will enhance the UAE’s status as a global hub for business and investment.

– Bal Krishen, Chairman and CEO, Century Financial

Last October, the world’s major economies moved closer to a minimum corporate tax rate. No less than 136 countries had reached an agreement to impose a minimum tax on large multinational corporations operating across national borders.

The fact that the UAE’s corporate tax system will come into effect on June 1, 2023 gives businesses – and everyone involved – plenty of time to prepare. “There is usually an element of surprise when most governments plan to introduce any type of tax,” said Atik Munshi, managing partner at Enterprise House, a consultancy. “So a one-year window should actually be enough for trading houses to plan for.

Corporate taxes will bring discipline within the corporate culture. As such, it was the need of the hour. UAE needs revenue to sustain growth

– JCG’s Jeet Gianchandani

“It would have been even better if more time had been given. The tax measure should bring more financial discipline in businesses and record keeping will certainly improve.

Why do governments want a global minimum corporate tax rate? Large multinational corporations have traditionally been taxed based on where they report their profits rather than where they actually do business.

The corporate tax announcement had been expected for months. With the issuance of Golden Visas and other residency benefits, the UAE has given all the right signals to attract long-term investment. It will also require significant investment in infrastructure to support this growth and corporation tax will help to meet these commitments.

– Vinayak Mahtani from bnbme

This has allowed several large corporations to avoid paying high taxes in the countries where they do most of their business by shifting their profits to low-tax jurisdictions.

However, it is interesting to note that global corporate tax rates have steadily declined since the 1980s. The average global corporate tax rate was above 40% in the early 1980s and has fallen well below 25% in 2020 as governments compete to cut tax rates to attract business and talent.

A number of tax experts say the most immediate trigger for the current global tax deal may have been the COVID-19 pandemic, which has hit economies around the world and affected government tax revenues. In the midst of all this, the American technology giants – Google, Facebook (or Meta) and others – have made record profits.

The rate of 9% applied by the United Arab Emirates remains one of the most competitive in the world. According to Nimish Goel, partner at Dhruva Advisors, “It’s probably one of the lowest in the world. Businesses have had ample time to prepare for the new regime as of June 1, 2023.

As was the case when the VAT announcement was made ahead of the introduction in January 2018, the next 16 months will be all about businesses preparing for the change. “Companies in the areas of auditing, accounting and tax consulting should prepare well in advance to integrate corporate tax into a company’s reporting system and push for more compliance. from all their clients,” said Kunal Bilakhia of Taxpro Advisors.

We will have to analyze the implications of corporation tax on small and medium-sized businesses. As for large companies, they can be happy to pay taxes in the UAE considering the relatively low rate compared to other countries and also taking into account the BEPS provisions.

– Dixit Jain, founder of The Tax Experts DMCC

The Federal Revenue Authority will be responsible for the administration, collection and enforcement of UAE corporate tax collections.

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