The UAE has long been recognised as a low-tax nation that attracted foreign investors and businesses. But that changed on January 31, 2022, when the Ministry of Finance announced the implementation of a new corporate income tax regime.

A basic Corporate Tax rate of 9 per cent will now be levied under the new regime, which is expected to take effect for any financial years beginning after June 2023. Profits that exceed AED 375,000 per annum will be subject to this tax rate and any profits below this number will continue to remain exempt from taxation. Multinational companies will also pay a higher 15 per cent corporation tax rate if their global revenue exceeds €750 million.

Underscoring the benefits of UAE’s free zones

The UAE’s implementation of corporate tax serves to highlight the advantages of the country’s numerous free zones, including the ADGM and DIFC, which foreign businesses have historically used to form fully owned Limited Liability Companies (LLCs) without the requirement of a local shareholder.

Companies founded in the free zones of the United Arab Emirates will also be subject to the new Corporate Tax framework, according to the Ministry of Finance. However, as long as they adhere to the regulatory criteria and refrain from conducting business in the UAE mainland, the corporate tax system will honour the corporate tax holiday afforded to free zone enterprises.

In the end, with the global average company tax rate set at 23.54 per cent, the new standard corporate tax rate of 9 per cent continues to be lower than the corporate tax rates of the majority of other nations. The proposed new corporate tax rate for the UAE is similarly lower than most of its GCC neighbours, barring Bahrain, but it is more comprehensive because it also applies to local enterprises.


Due to its strategic location and hospitable milieu of economic stability and business opportunity, the UAE continues to be an appealing investment opportunity. However, companies that already conduct business in the mainland UAE will look out for the situation and eagerly await the specifics of the new corporate tax regime to see how it will affect their future returns on investment. As for new businesses planning to expand to the UAE, the country presents an exceptional business ecosystem and boasts one of the lowest corporate tax rate in the world, making it a very attractive location for businesses of all kinds.

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