The United Arab Emirates (UAE), since formed on 2nd December 1971 as a federation with seven Emirates namely Abu Dhabi, Dubai, Sharjah, Ajman, Umm Al Quwain, Ras Al Khaimah and Fujairah, has long been renowned for its zero tax policies, attracting businesses and workers from across the globe.

On 9 December 2022, the UAE released the Federal Decree-Law No. (47) of 2022 on the taxation of corporations and businesses. The corporate tax of 9% applies to taxable persons for financial years commencing on or after 1 June 2023. The corporate tax law is materially aligned with the public consultation document that was released by the Ministry of Finance on 28 April 2022 and which expands on many of the key provisions. The UAE corporate tax regime is predominantly based on international best practices with a minimal compliance burden placed on businesses relatively to other regimes internationally.

Prior to the implementation of Decree-Law No 47 of 2022, the UAE did not have a federal income tax system as the federal government had not enacted any income tax laws. It should be noted that individual Emirates have been statutorily entitled to impose tax on the income of body corporates carrying on "certain" business in the UAE, since the late 1960s/early 1970s.

The UAE joined the Inclusive Framework (IF) of the Organization for Economic Co-operation and Development’s (OECD) on Base Erosion and Profit Shifting (BEPS) in May 2018, becoming the 116th member of the Inclusive Framework. As a result, the UAE signed the OECD multilateral instrument (MLI) which entered into force with affect from 1st September 2019. Since then, the UAE had participated in implementing the BEPS 1.0 minimum standards and also welcomed the statement issued by the OECD and the G20 (G20/OECD) on the Inclusive Framework on BEPS 2.0 with regards to laying the blocks for a new global tax framework and the UAE is fully supported on pillar one and pillar two of BEPS 2.0.

While the introduction of 9% corporate tax rate marks a significant shift in the UAE’s tax policy, it is still significantly lower than the proposed Global Minimum Tax rate of 15%.

JPA Emirates