UAE introduces universal federal corporate tax for first time. How will this affect expats?

UAE introduces universal federal corporate tax for first time. How will this affect expats?

Following international tax standards and obligations, the United Arab Emirates imposes a 9% tax on company income, with two exceptions.

In 2021, the United Arab Emirates became a member of an agreement on a minimum corporate tax of 15% on the income of major international corporations. 136 countries have signed this agreement and agreed that an international company pays taxes in the country where it operates.

This is part of the policy to combat international tax evasion and misuse of international law.

In the UAE, 90% of the population are foreigners: tourists, expats, workers, entrepreneurs, and investors. The reason why the UAE is so popular in the latter two categories was the absence of corporate taxes. They apply to any business, except for those engaged in the extraction and processing of natural resources (oil, gas, and derivatives).

Recently, the federal government of the United Arab Emirates has announced a new universal corporate tax. 9% will be charged from the income of local and international businesses. The tax will be levied throughout the country, in any seven emirates.

It is estimated that this measure will attract about $13 billion to the country's budget.

However, many foreigners are unlikely to encounter these innovations.

  • Firstly, the tax is levied only on companies with revenue over $102,000 for the billing period. Taxes will not affect small businesses and startups.
  • Secondly, companies in the Special Economic Zones (SEZ) are exempt from the tax. They are autonomous in tax regimes.
  • Thirdly, there are no personal income taxes in the UAE, and they are unlikely to be in the future.

At the same time, the UAE has a list of economic sectors on which it relies on economic diversification. In addition to the knowledge-intensive technological and IT sectors, the focus is on the construction sector. 

This allocation of funds will eventually settle in the housing market. These can be new infrastructure and image projects.

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