The United Arab Emirates is to introduce a 9% corporate tax rate commencing on 1 June 1, 2023, while it awaits the FATF decision on its anti-money launding measures.
The move marks the first ever time it has actioned a federal corporate tax on business earnings.
UAE's Ministry of Finance said in a statement that the corporate tax will not apply to personal income from employment, real estate, and other investments or to income earned from a business licensed outside of the UAE.
The new corporate tax also does not apply to companies in Emirati free zones unless they conduct their business onshore. Another exception are oil and gas companies, which are subject to their own tax schemes.
Furthermore, the new tax is not on individuals and their incomes, so the corporate tax will not apply to salaries and other employment income.
Business profits of up to $102,000 will not be taxed, the ministry said, in order to support small businesses and start-ups.
In addition, foreign taxes can be credited against the UAE's corporate tax to avoid double taxation.
The tax scheme will allow UAE business groups to be taxed as a single entity or apply for relief amid losses or restructuring.
Younis Haji Al Khoori, under-secretary at the ministry of finance, said: "The UAE reaffirms its commitment to meeting international standards for tax transparency and preventing harmful tax practices."
He added that the new regime would allow the UAE to support efforts to introduce a global minimum tax rate.
Meanwhile the UAE and the Financial Action Task Force (FATF), a global financial crime monitoring group, will hold meetings in Paris at the end of this month to assess a progress report submitted by the UAE late last year.
In March FATF will update its list of high-risk and other monitored jurisdictions.
In 2020 FATF said the UAE needed "fundamental and major improvements" to avoid landing on its 'grey list' of countries under increased monitoring.
The UAE's Executive Office for Anti-Money Laundering and Counter Terrorism Financing, established last February, said the financing risks assessment initiated would help the public and private sectors implement new requirements.
A statement on state news agency WAM said: "The risk assessment will cover how financial resources may be used to develop nuclear, chemical, and biological weapons, including the means, technologies, and dual-use goods used in their delivery. It will also emphasise the private sector's obligations under UAE law."
