Fitch: UAE income tax could affect private corporates and some GREs

Fitch: UAE income tax could affect private corporates and some GREs

Fitch Ratings: The recently announced mid-2023 introduction of the Federal Corporate Tax in the United Arab Emirates (UAE) could have uneven credit implications on rated corporates, with privately owned corporates and government-related entities (GREs) rated on a bottom-up basis most affected, Fitch Ratings says. Many details have not been made public yet and the potential impact on individual ratings will be assessed on a case-by-case basis and communicated to the market in due course.

Fitch differentiates the likely credit impact of the tax introduction depending on the type of corporate and splits Fitch-rated issuers into three broad groups: i) GREs rated on a top-down basis, ii) GREs rated on a bottom-up basis and onshore companies rated on a standalone basis, and iii) offshore entities in free zones.

For GREs rated on top-down basis, the corporate tax will not affect our expectations of state support and links with the government, and therefore we expect limited risk of pressure on those ratings.

UAE GREs rated on a bottom-up basis and onshore privately owned companies rated as standalone entities are likely to be most affected by the tax introduction. The impact on individual credit profiles will be determined by a number of factors, including issuers’ ability