UAE issues new federal corporate tax

• Yesterday, the UAE Ministry of Finance (“MOF”) announced a new federal corporate tax system on taxable profits accrued by onshore UAE businesses for financial years starting on or after 1 June 2023. The proposed federal corporate tax will be levied at a standard rate of 9% with a nil tax rate for SMEs (with taxable profits of up to AED 375,000).

• The new regime will apply to all onshore entities (save for those licensed for natural resources exploration) but, subject to certain conditions which have not yet been published, will not apply within the financial free zones, which will continue to enjoy the corporate tax regimes that apply currently.

• The MOF has also clarified that corporate tax will not be imposed on income earned from employment, real estate and/or other investments in the UAE. It is not yet clear how these exemptions will be defined.

• All onshore entities will be required to make a single corporate tax filing per financial year and corporate tax will be paid in arrears.

Full details of the new regime are awaited and are anticipated to be published later this year. If you would like to have a preliminary discussion, please contact James Coleman at james.coleman@simmons-simmons.com.