OECD rates UAE’s free zone corporate tax ‘non-harmful’

REUTERS/Phil Noble

The UAE free zone corporate tax (CT) regime has been recognised as ‘non-harmful’ by the Paris-based policy forum Organisation for Economic Co-operation and Development (OECD), the Gulf state’s finance ministry said.

The findings were disclosed in the results from an October 2023 meeting on harmful tax practices, the UAE state-owned Wam news agency reported.

The rating is part of the OECD’s comprehensive review of 322 taxation regimes worldwide.

According to the findings, the UAE’s free zone corporate tax regime was evaluated and confirmed to align with global initiatives to prevent tax avoidance and harmful tax practices.

“The OECD rating of ‘non-harmful’ is a testament to the UAE’s commitment to transparency, non-harmful taxation, and the implementation of best practices in tax policy,” said Mohamed Hadi Al Hussaini, minister of state for financial affairs.

The ministry remains dedicated to further refining the country’s nation’s tax framework, ensuring its economic diversification and development, he added.

The UAE introduced its nationwide corporate tax regime in 2023 as a strategic move designed to accelerate the UAE’s development and transformation, aligning with its long-term strategic objectives to diversify its economy.

As per the finance ministry, corporate tax rates are zero percent for taxable income up to AED375,000 ($100,000) and nine percent for taxable income above AED375,000.

Free zones are central to the UAE’s economic growth, attracting foreign direct investment and fostering a favourable business environment.

The recognition by the OECD comes as AGBI reported last week that the UAE has made “positive steps” to meet anti-money laundering and terrorism funding standards and is likely to be removed from an international grey list later this month.

Experts say this will provide a major boost to the Gulf state’s economy.

The country was placed under enhanced supervision – known as the grey list – in March 2022 after the Financial Action Task Force (FATF) cited “strategic deficiencies” in the systems it uses to counter financial crime.

A decision on the UAE’s grey list status is expected to be made on February 23.