Weeks after the United Arab Emirates “UAE” unveiled a new company levy as part of an effort to shed its tax haven image, a senior official declared that the Gulf nation has no plans to introduce an income tax for now.
Earlier this year, UAE had said it would impose a 9% corporate tax starting in 2023 in its attempt to align itself with new international standards, specifically the move toward a global minimum tax on multinational corporations endorsed by the Group of 20 major economies. The UAE’s new corporate tax has been received in a “positive manner” by businesses, said the minister. The new levy is going to replace most of the fees companies now have to pay, according to Al Zeyoudi.
Meanwhile, last month, Younis Haji Al Khoori, Undersecretary of the Ministry of Finance had said, “as a leading jurisdiction for innovation and investment, the UAE plays a pivotal role in helping businesses grow, locally and globally. The certainty of a competitive and best in class corporate tax regime, together with the UAE’s extensive double tax treaty network, will cement the UAE’s position as a world-leading hub for business and investment.”
Younis Haji Al Khoori further adds that “with the introduction of corporate tax, the UAE reaffirms its commitment to meeting international standards for tax transparency and preventing harmful tax practices. The regime will pave the way for the UAE to address the challenges arising from the digitalisation of the global economy and the other remaining BEPS (Base Erosion and Profit Shifting) concerns, and execute its support for the introduction of a global minimum tax rate by applying a different corporate tax rate to large multinationals that meet specific criteria set with reference to the above initiative.”
The Gulf nation has already taken several steps to dilute its reputation as a tax haven for both businesses and individuals. It introduced a 5% value-added tax in 2018. It already taxes banks and insurance companies operating outside of the country’s vast network of free zones as much as 20% on their profits. The oil and gas sector of OPEC’s third-biggest producer is also taxed under a separate program. Over the next few weeks, the Ministry of Finance is expected to announce more details clarifying how the corporate tax will be imposed.
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