The news is a significant shift for a country that’s long attracted businesses from around the world thanks to its status as a tax-free commerce hub.
Individuals will still not be subject to tax on their incomes from employment, real estate, equity investments or other personal income unrelated to a UAE trade or business, the ministry said. The tax also won't be applied to foreign investors who don't conduct business in the country.
As for what constitutes profit, corporate tax will apply on"the adjusted accounting net profit" of the business. Free zone business, meanwhile — thousands of which exist in the country — can"continue to benefit from corporate tax incentives" as long as they"meet all necessary requirements," the ministry said, without elaborating. Companies within the UAE's many free zones have long enjoyed zero taxes and full foreign ownership, among other benefits.
"The UAE corporate tax regime has been designed to incorporate best practices globally and minimise the compliance burden on businesses," state news agency WAM wrote. "Corporate tax will be payable on the profits of UAE businesses as reported in their financial statements prepared in accordance with internationally acceptable accounting standards, with minimal exceptions and adjustments. The corporate tax will apply to all businesses and commercial activities alike, except for the extraction of natural resources which will remain subject to Emirate level corporate taxation.
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