The demographic composition of the UAE is predominantly expatriate, comprising nearly 90% of the population. 

The introduction of VAT and corporate tax aligns with the objective of retaining financial resources within the country, fostering a healthier national economy.

Historically, before initiatives such as the golden visa, expatriates would often accumulate savings and either return to their home countries or contribute financially from abroad. This practice served as an alternative means of retaining foreign capital within the UAE.

The prospect of introducing income tax appears unlikely, as it could obligate the government to provide extensive public services, such as healthcare and education benefits. This potential obligation, coupled with the risk of driving away foreign investors, aligns with the UAE’s ongoing efforts to attract and maintain a robust foreign investment environment.

In recent years, the United Arab Emirates (UAE) has undergone significant tax reforms aimed at aligning its tax system with international standards and diversifying state revenue. The introduction of Value Added Tax (VAT) in January 2018 marked the beginning of this transformative journey, followed by the implementation of economic substance rules (ESR) and Country-by-Country Reporting (CbCR) regulations in April 2019. These measures reflect the UAE’s commitment to international best practices in taxation.

The latest development in this series of reforms is the forthcoming Corporate Tax (CT) law, which will impose corporate income tax on profits generated by UAE businesses during a specified tax accounting period.

Anticipated to be released in mid-2022, the law and accompanying regulations will undoubtedly bring about significant changes. As businesses prepare for these developments, a key question arises: do they possess adequate information to assess the potential impact of this announcement?

This alert seeks to provide clarity by sharing insights based on frequently asked questions (FAQ) issued by the Ministry of Finance (MoF).

The Corporate Tax (CT) will be applicable for financial years commencing on or after 1 June 2023.

For companies opting for a fiscal year starting on 1 June 2023 and concluding on 31 May 2024, the CT will be applicable from 1 June 2023, with the first tax return filing expected towards the conclusion of 2024.

Alternatively, companies adopting a calendar year structure from 1 January 2023 to 31 December 2023 will become subject to CT starting 1 January 2024. The filing deadline for these companies is anticipated to fall around mid-2025.