Corporate tax to bolster UAE economy manifold

Corporate tax to bolster UAE economy manifold

On January 31, 2022, the UAE announced plans to introduce corporate tax at a headline rate of 9 per cent for taxable net income greater than Dh375,000. In addition, a different rate will be proposed for very large companies that are covered under the provisions of OECD Pillar2. This rate of tax could be 15 per cent.

The domestic corporate tax regime will be effective for financial years starting on or after June 1, 2023. The proposed tax rate is competitive and is comparable to global low tax hubs.

With the introduction of VAT in 2018, Country-by-Country Reporting, and ESR in 2019, the introduction of corporate tax was written on the wall.

Goel said, “In my opinion, the introduction of corporate tax was imminent after OECD’s Pillar1 and Pillar2 announcements to which UAE is a signatory. With a Global Minimum Tax proposed under Pillar2, the absence of a corporate tax in the country would have led the UAE to lose its share of tax, which anyways would have been collected by other countries. This would have led UAE to finance the other country, instead of financing the foreign companies based in the UAE. Further, for UAE to remain a dominant force in attracting