The United Arab Emirates’ Ministry of Finance released on Monday information on exemptions to its corporate tax. The list includes businesses working in natural resources and follows an announcement on tax relief for small businesses.
Background: The UAE announced last year its first-ever tax on business profits. The 9% tax on companies and freelancers earning more than 375,000 Emirati dirhams ($102,000) will take effect in June. Entities in the UAE previously did not need to pay taxes, instead paying business fees to the Emirati state.
The Emirates had several motivations for introducing the tax, including efforts to reduce dependence on energy for revenue and increase financial transparency.
Emirati authorities have been working throughout the year to ready the country for the tax implementation. In February, the Ministry of Finance held “Corporate Tax Public Awareness Sessions” throughout the country.
What it means: The following entities will be exempt from the upcoming tax, according to the Ministry of Finance:
- Government and government-controlled entities.
- People engaged in extractive and natural resource businesses that meet certain conditions. Extractive in this case refers to activities involving raw materials from the Earth.
- “Public benefit” entities that meet certain conditions.
- Investment funds that meet certain conditions.
- Public pension and social security funds, as well as private pension funds that are regulated by the UAE government.
The UAE governmental Cabinet also has the authority to exempt people from the tax upon suggestion from the finance minister. Non-UAE residents will likewise not be required to register for the tax if they only earn a UAE-sourced income and do not have a permanent establishment in the UAE, per the ministry.
Know more: The UAE Ministry of Finance also announced last week tax relief for small businesses under the upcoming tax regime. Taxable individuals can claim the relief if their revenue in the relevant period is below 3 million dirhams ($820,000), according to the ministry.
The UAE’s corporate tax is still one of the lowest in the world, and the Gulf state is likely to remain an attractive destination for businesses. Still, Saudi Arabia is seeking to pry businesses away from the UAE and lure them to Riyadh, Sam Wendel wrote in a memo for Al-Monitor PRO in February.
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