Why the UAE is introducing corporate tax

The UAE’s introduction of corporate tax will ensure that it is not used as a jurisdiction to “move profits” from other higher taxed markets, according to a lawyer in Dubai. 

“Historically, the UAE was blacklisted by the European Union, because they were trying to ensure that the Emirates are not used as a jurisdiction where companies are artificially shifting profits,” according to Shiraz Khan, head of tax at law firm Al Tamimi & Company. 

• UAE exempts public benefit entities from corporate tax
• Corporate tax will make UAE ‘more open for investors’

A standard rate of 9 percent will come into effect in the UAE on June 1 this year for companies recording an annual turnover of over AED1 million ($272,294).

The move is a reaction to the Organisation for Economic Co-operation and Development’s global drive to implement a minimum tax level of 15 percent for companies with revenues over $804 million, to discourage tax-motivated profit shifting and tax avoidance. 

“The UAE could’ve chosen not to impose corporate tax, but the consequence of this would be that other countries are taxing multinational companies on profits they are generating in the Emirates,” Khan said.

“Then [the UAE] would be losing out. That’s one of the main reasons why corporate tax was introduced.”

Watch the full video to understand why the introduction of the levy could also help the UAE escape being branded as a tax haven