Dubai Announces 9%
How does this new tax apply and is this the end of Dubai as a tax advantaged jurisdiction?
Corporation Tax Hits Dubai!
Corporation tax is coming to Dubai from June 2023 at a rate of 9% on profits over 375,000 AED. Profits below this amount will benefit from a 0% tax threshold. All UAE businesses will be subject to corporate tax except those in the extraction of natural resources i.e., oil and gas which are already subject to tax. Businesses with an accounting reference date of 31 December will become subject to CT from 1 January 2024.
The good news is that for companies conducting business outside of the UAE the new corporation tax rate does not apply. Therefore, most of our clients conducting business in the UK, USA, and Europe. Dubai remains a great tax-free jurisdiction to business in.
For those earning revenues from within the UAE there are opportunities to reduce the profits of the company to allow for them to remain essentially tax free, examples could be buying watches, cars, and yachts through the company for business use. Additionally, a salary would remain a tax-deductible expense, and can be received tax free as a UAE resident.
What Other Changes Have Been Made?
Dubai businesses with international headquarters will be exempt from paying tax on dividends and capital gains received from qualifying shares.
Dubai businesses with global offices will be able to deduct foreign taxes paid in other countries from UAE Corporate Taxes. Qualifying shareholdings are ownership interests in UAE or foreign companies that meet certain conditions outlined in the Corporate Tax law.
Loss utilisation rules will be generous in the Corporate Tax system. Groups can be taxed as a single entity or take advantage of group relief for intragroup transactions and restructurings.