The United Arab Emirates on Monday announced that it will impose a 9% corporate tax rate, according to a report by news agency Financial Times. The announcement comes when another Asian major economy, India, announced its Union Budget for the year 2022 and is expected to make an impact among businesses based in the UAE as it was known to be a tax haven.
India and the UAE share strong relations even on the trade front as India is the Emirati nation’s third largest trading partner. According to the Indian Embassy in UAE, investments made by Indian companies in the UAE would be in excess of US$85 billion.
The website also lists major Indian companies like the Taj Group of Hotels, Hinduja Group, JK Cement, Ashok Leyland, Mahindra, Dabur, IL&FS and Essar Steel among others that are heavily invested in the UAE.
The new corporate tax decision comes as the UAE aims to modernise its economy and adapt to international taxation norms. The tax on corporate profits comes as the UAE administration seeks to help large economies close tax avoidance loopholes.
“The UAE reaffirms its commitment to meeting international standards for tax transparency and preventing harmful tax practices,” the under secretary of UAE ministry of finance Younis Haji Al Khoori was quoted as saying by the Financial Times. He also said that the UAE was supporting efforts to introduce a global minimum tax rate.
Experts believe that the move will strengthen the Gulf nation’s fiscal framework. The UAE called its tax rate the ‘most competitive in the world’.
How Will The Tax Be Applied
The new regime will come into effect from June 2023. It will cover all business activities in the UAE barring extraction of natural resources. The tax will be imposed when the income exceeds $102,000 or 375,000 dirhams.
The tax will not be imposed on foreign investors who did not conduct business activities in the UAE.
The UAE, known as a tax haven, remains a lucrative destination due to its ‘free zones’. These free zones have led to growth as foreign investors could own businesses without any local partner.
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