UAE Maintains Tax-Free Income System, Implements Corporate Tax for Economic Growth.
The UAE authorities have made it clear that there are no intentions to introduce income tax. Ministry of Finance Undersecretary Haji Al Khoori emphasised that the UAE has no plans to implement a personal income tax. This statement reaffirms the Government’s commitment to maintaining a tax-free income environment for individuals in the UAE. The Minister of State for Foreign Trade, Dr Thani bin Ahmed Al Seyudi, also previously stated that personal income tax was not under consideration.
No Corporate Tax on Personal Income
Haji Al Khoori further clarified that there is no corporate tax on the personal income of workers employed in both the Government and Private sectors. This means that individuals in the UAE do not have to pay corporate tax on their salaries or other personal income derived from employment. The Government aims to foster a business-friendly environment and encourage economic growth by exempting personal income from corporate tax.
Introduction of Corporate Tax
While income tax remains absent, the UAE implemented corporate tax starting from June 1. This new corporate tax regime marks a significant step in the country’s economic strategy. The UAE aims to double its economy to $816.8 billion by 2031, and the introduction of corporate tax is a key component of this plan. It is important to note that corporate tax does not apply to salaries or other personal income earned through employment.
Recent Developments and Relief Measures
In recent weeks, the Ministry of Finance issued three new decisions providing further exemptions and guidelines for financial statement preparation ahead of the corporate tax implementation. These decisions aim to streamline the transition and ease the compliance process for businesses. Furthermore, the Ministry of Finance announced a corporate tax relief program last month, benefiting small businesses in the UAE with revenues of Dh3 million or less.
Details of Corporate Tax Implementation
The UAE introduced a federal corporate tax in January 2022, with a standard statutory rate of 9 percent. Businesses with fiscal years beginning on or after June 1, 2023, and ending on or before May 31, 2024, have until February 28, 2025, to file their tax returns and make payments. The UAE Government has taken proactive measures to ensure businesses have adequate time to adapt to the new tax regime and fulfil their obligations.
