UAE introduces corporate income tax to expand revenue, fuel economic growth
Date
10/30/2023 7:41:59 AM
(MENAFN) The United Arab Emirates (UAE) is embarking on a significant economic shift by introducing corporate income tax, which takes effect on Thursday. This strategic move not only contributes to broadening the revenue base of the Arab world's second-largest Economy but also aligns with the country's long and short-term economic growth objectives. The decision signifies a broadening of the UAE's taxation framework, extending beyond Value Added Tax (VAT) and customs duties, as part of its ongoing efforts to diversify the economy away from oil dependence, according to analysts.
Monica Malik, the Chief Economist at Abu Dhabi Commercial Bank, views this development as highly positive, emphasizing its role in diversifying the economic landscape and government revenue sources. Initiatives like the introduction of VAT in 2018 and the corporate tax law established last year were aimed at enhancing the near and medium-term fiscal framework. The UAE's move towards a corporate tax regime represents another step in the same direction, closely aligned with its ambitious 50-year growth agenda.
As the UAE forges ahead with these comprehensive economic reforms, it concurrently works towards boosting its economic resilience. The nation's goals include doubling its economy to Dh3 trillion ($816.8 billion) by 2031. This is part of its ongoing recovery efforts following the economic slowdown caused by the COVID-19 pandemic while maintaining robust growth momentum.
The introduction of a corporate tax is part of a broader strategy implemented by the UAE, underlining the country's commitment to progressive economic reforms. These encompass trade agreements, urban development initiatives, renewable energy investments, and the strengthening of the fiscal framework. The UAE's multifaceted approach to economic transformation positions it as a dynamic player on the global economic stage.
In January 2022, the UAE rolled out the federal corporate tax, featuring a standard statutory rate of 9 percent. This tax takes effect for businesses with financial years commencing on or after June 1, 2023. In December of the same year, the federal corporate tax law was enacted, encompassing companies with incomes exceeding Dh375,000 in the corporate tax bracket.
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