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How will the UAE’s new corporate tax rules affect private companies?

How will the UAE’s new corporate tax rules affect private companies?

3 November 2023

Companies in the free zone should carefully study the new rules of corporate taxation of the UAE for a clear understanding of their impact on business activities.

As a new corporate tax regime comes into force in the UAE, many companies in free zones still do not understand how such changes will affect them. 

The new corporate tax rate of 9%, which will come into force next fiscal year, corresponds to the second level of the broader OECD system, which includes a general requirement for a minimum corporate tax level of 15% for large multinational corporations. 

The UAE Government has presented a comprehensive corporate taxation policy, which presents the taxation rules for both the mainland and free zones in order to promote the creation of a fair and transparent business environment.

Despite the fact that the UAE authorities have decided to provide tax holidays for free zone companies, not all companies from more than 40 free zones of the UAE are entitled to such holidays. Certain areas and activities, such as the production of goods and services, manufacturing, production management and logistics, are eligible for tax holidays. 

However, areas such as banking, insurance, finance and leasing, production and use of oil resources will continue to be taxed at a rate of 9%.

During the discussion, it turned out that the tax holidays do not imply tax exemption, but rather suggest setting the corporate tax rate at 0% with the possibility of future adjustments. However, experts believe that any increase in the corporate tax rate in free zones is unlikely, since tax holidays serve as an incentive for business development.

If you are planning to open a company in the UAE, you need assistance in legal and tax support, leave a request in the form below and we will contact you as soon as possible.

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    ARAVANA Capital management
    3 November 2023
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