United Arab Emirates

There is a growing trend of tax reforms in the Middle East region, and the United Arab Emirates (UAE) has implemented excise tax, value-added tax (VAT), and economic substance regulations in October 2017, January 2018, and April 2019, respectively. Country-by-country (CbC) reporting was also implemented in April 2019.

The UAE federal corporate tax (CT) was introduced in 2022 and applies to taxpayers’ financial years starting on or after 1 June 2023.

UAE CT is applicable across all Emirates and applies to all business and commercial activities, subject to certain exceptions. Transfer pricing rules and documentation requirements are also introduced as part of the UAE CT regime. The Federal Tax Authority (FTA) is responsible for the administration, collection, and enforcement of CT.

On 24 November 2023, the Cabinet of Ministers issued Federal Decree Law No. 60 of 2023 with regards to amendments to the provisions of UAE CT Law. The amendments introduce some key terms from the Global Anti-Base Erosion (GloBE) Rules, including definitions for ’top-up tax’ and ‘multinational enterprise’ (MNE), and appear to be the first step in laying the foundations for the subsequent implementation of GloBE Rules in the United Arab Emirates. 

On 15 March 2024, the UAE Ministry of Finance (MoF) launched a digital public consultation on the Pillar Two rules based on the Organisation for Economic Co-operation and Development (OECD) Model Rules. The public consultation was closed on 10 April 2024. The MoF stated that the objective of this consultation is to gather the views of stakeholders with respect to the potential policy design options to respond to the implementation of the GloBE Rules worldwide.

Economic substance regulations

On 30 April 2019, the UAE MoF issued economic substance regulations ('Regulations'), which were repealed by the Regulations issued on 1 September 2020 introducing a requirement for certain juridical persons (persons with separate legal personality) and unincorporated partnerships that carry on a relevant activity in the United Arab Emirates ('UAE licensees') to have adequate 'economic presence' in the United Arab Emirates, relative to the activities they undertake.

Whilst UAE entities operating in Free Zones are required to maintain adequate economic substance under certain conditions, it is currently unclear what impact the proposed UAE CT regime will have on the economic substance requirements in the United Arab Emirates, especially in relation to entities subject to CT at the 9% rate.

See Economic substance requirements in the Other issues section for more information.