Income Taxes for International Companies in the UAE: A New Stage of Development

From January 1, 2025, the United Arab Emirates (UAE) will introduce a new corporate tax for international companies, which will be part of a global anti-offshore initiative supported by the Organisation for Economic Co-operation and Development (OECD). This is a significant change in the tax policy of the country, which until recently attracted businesses with its zero tax rate for most companies.

The new corporate income tax rate will be 15% for international corporations that meet certain criteria. The tax will be payable by companies with consolidated annual revenues exceeding €750 million. Also, if a company has recorded revenues above the specified threshold in at least two out of four financial years, it will be obliged to pay the new tax.

The main objective of introducing the new tax is to eliminate competition between countries with different tax rates and control the movement of income of companies that make profits in the UAE.

This is a step towards integrating the UAE into the global economic system, where transparency and tax compliance are becoming increasingly important.

Comparison with other countries

Despite the introduction of the new tax, the corporate tax rate in the UAE will remain lower than the global average. For example, in the US, companies are required to pay a federal corporate tax of 21%. In Germany, corporate tax is around 15%, but with the addition of trade tax, the total rate can reach 30%. In this context, 15% in the UAE looks quite competitive.

In 2023, the UAE has already introduced a tax of 9% for companies with annual profits of more than AED 375,000 (approximately US$102,000), but this tax did not apply to many free trade zones, making the UAE attractive for business.

It is important to note that the UAE still has no income tax for individuals. In addition, the country does not levy taxes on capital gains, inheritance, real estate and gifts. This creates unique conditions for investors and entrepreneurs who want to optimize their tax obligations.

To attract investment to the country, there is a “golden visa” program that allows investors and their families to obtain long-term residency in the UAE. To obtain such a visa, it is necessary to invest in the country's economy from $ 545,000. A 2-year residence visa is also available for investments from $ 204,000. These visas open up opportunities for opening accounts in local banks and doing business in the region.

The introduction of corporate income tax for international companies in the UAE is a significant step that reflects the country's commitment to integrating into the global economy and increasing the transparency of the tax system. Despite the new tax obligations, the UAE remains an attractive jurisdiction for business due to its low tax rates and the absence of personal income taxes. This balance between tax policy and investor appeal continues to make the UAE an important hub for international business.

If you would like to learn more about the new tax rules and their impact on your business, we invite you to a one-on-one meeting with Mercury Group experts.