UAE begins corporate tax roll-out amid diversification push
By Lisa Barrington
DUBAI, June 1 (Reuters) -The UAE began rolling out a 9% business tax on Thursday, with relief for small firms and likely exemptions for export-focused free zone activities, as the formerly tax-free oil producer seeks to boost non-oil revenue and remain a regional commercial hub.
The business tax follows a 5% value added tax (VAT) introduced in 2018, gradually eroding the United Arab Emirates' tax-free status that helped it carve out a role as an international trade and tourism hub and magnet for the ultra-rich.
Some tax regulations have not yet been published, including details on how income earned by entities in the UAE's more than 30 free zones - which export tens of billions of dollars of goods to neighbouring states - will be taxed.
The government has said it introduced the tax to align with international efforts to combat tax avoidance, as well as to address challenges arising from the digitalisation of the global economy. The UAE does not levy personal income taxes.
Tax reform is gradually appearing across the Gulf Cooperation Council (GCC) which has historically funded budgets from hydrocarbon revenues. In 2017 GCC states agreed to introduce VAT.
S&P ratings agency estimates the tax could add 1.5%-1.8% of gross domestic product from 2025 to the annual revenues of the UAE's seven emirates based on the VAT model, which gives 70% of receipts to the collecting emirate and the rest to the federal government.
"The tax will help diversify the UAE government's revenue away from the oil sector. However, the full impact is unclear because it has not yet been announced exactly how the tax will be distributed amongst the individual emirates," S&P's Trevor Cullinan said.
OECD TAX FORM
The UAE's 9% rate on taxable income above 375,000 dirhams - around $100,000 - is the lowest in the GCC, apart from Bahrain which does not impose a general corporate tax.
Saudi Arabia levies 20%, Qatar 10% and Kuwait 15% on foreign-owned firms, and Oman has a corporate rate of 15%, according to consultancy PwC.
Muhammad Rasoul CEO of amana, a mid-sized UAE-based financial services company, said the corporate tax is a natural step to bring the UAE in line with best practices globally.
"The key will be to ensure the economy stays competitive, at both the regional and global level ... But let's be clear – the tax rate doesn't seem to be overly high, especially compared with what businesses must manage elsewhere in the world," he said.
Firms from Thursday will become liable for corporate tax when their financial years start, meaning tax returns will not fall due until 2025.
The UAE tax coincides with a new global minimum corporate tax from the Organisation for Economic Cooperation and Development (OECD), signed by 136 signatories including the UAE, to ensure big companies pay a minimum 15% and make tax avoidance harder.
The UAE has not yet published regulation on the OECD tax, but without its own corporate tax system, another country could collect the 15%, tax experts say.
The UAE legislation levies 0% or 9%, but with caveats for smaller earners and excluding personal income from employment, investment and real estate.
Individuals only have to register with revenues over 1 billion dirhams and a small business relief scheme means revenues under 3 million dirhams will have no taxable income.
"They wanted to make it as friendly as possible to small and medium enterprises and startups. And at the same time they don't want to encourage companies shifting from the UAE," said Wassim Chahine, head of corporate tax for KPMG Lower Gulf.
The UAE Federal Tax Authority and the Ministry of Finance declined to comment.
Reporting by Lisa Barrington; Editing by Simon Cameron-Moore
면책조항: XM Group 회사는 체결 전용 서비스와 온라인 거래 플랫폼에 대한 접근을 제공하여, 개인이 웹사이트에서 또는 웹사이트를 통해 이용 가능한 콘텐츠를 보거나 사용할 수 있도록 허용합니다. 이에 대해 변경하거나 확장할 의도는 없습니다. 이러한 접근 및 사용에는 다음 사항이 항상 적용됩니다: (i) 이용 약관, (ii) 위험 경고, (iii) 완전 면책조항. 따라서, 이러한 콘텐츠는 일반적인 정보에 불과합니다. 특히, 온라인 거래 플랫폼의 콘텐츠는 금융 시장에서의 거래에 대한 권유나 제안이 아닙니다. 금융 시장에서의 거래는 자본에 상당한 위험을 수반합니다.
온라인 거래 플랫폼에 공개된 모든 자료는 교육/정보 목적으로만 제공되며, 금융, 투자세 또는 거래 조언 및 권고, 거래 가격 기록, 금융 상품 또는 원치 않는 금융 프로모션의 거래 제안 또는 권유를 포함하지 않으며, 포함해서도 안됩니다.
이 웹사이트에 포함된 모든 의견, 뉴스, 리서치, 분석, 가격, 기타 정보 또는 제3자 사이트에 대한 링크와 같이 XM이 준비하는 콘텐츠 뿐만 아니라, 제3자 콘텐츠는 일반 시장 논평으로서 "현재" 기준으로 제공되며, 투자 조언으로 여겨지지 않습니다. 모든 콘텐츠가 투자 리서치로 해석되는 경우, 투자 리서치의 독립성을 촉진하기 위해 고안된 법적 요건에 따라 콘텐츠가 의도되지 않았으며, 준비되지 않았다는 점을 인지하고 동의해야 합니다. 따라서, 관련 법률 및 규정에 따른 마케팅 커뮤니케이션이라고 간주됩니다. 여기에서 접근할 수 있는 앞서 언급한 정보에 대한 비독립 투자 리서치 및 위험 경고 알림을 읽고, 이해하시기 바랍니다.