Expert and legal advisor Dr. Faisal Alhefeiti:

“Corporate Tax enhances the UAE’s position as a global business and investment hub”

Dubai, United Arab Emirates, Monday, 8 January, 2023:

Expert and legal advisor, Dr. Faisal Saeed Alhefeiti, confirmed that the corporate tax applied in the United Arab Emirates enhances the UAE’s position as a global center for business and investment.

Dr. Faisal Saeed Alhefeiti explained that the enforcement of corporate tax in the UAE came in line with international efforts to combat tax evasion, as well as to confront the challenges arising from the digitization of the global economy.

Alhefeiti continued: “The 9% tax rate imposed by the UAE on corporate income exceeding 375 thousand dirhams (about US$ 100,000) is considered the lowest in the GCC countries, with the exception of Bahrain, which does not impose a general tax on companies, and the tax imposed by the UAE coincides with a new global minimum corporate tax set by the Organization for Economic Cooperation and Development and ratified by 136 countries, including the UAE, to ensure that large companies pay at least 15% of their income and make tax evasion more difficult”.

He stressed that “the UAE is keen to have a competitive tax system for companies and provide a special tax system for free zones that enhances the UAE’s position as a leading global center for business and investment, supports its sustainable development agenda, and enhances its future plans to attract huge investments to maintain its economic position and leadership in the region”.

Faisal Alhefeiti stated that corporate tax will neither be imposed on personal income earned from work, nor any other personal income earned through real estate investment activities or other investments.

Alhefeiti explained that the Corporate Tax Law sets the legislative basis for imposing and enforcing a federal tax on companies, which began to be implemented in June 2023, pointing out that the introduction of this tax aims to support the UAE in achieving its strategic goals and accelerating the pace of its development and growth. Moreover, the certainty of a competitive corporate tax system that adheres to international standards, coupled with the country’s extensive network of double taxation avoidance agreements.

He stressed that the corporate tax system in the UAE is based on the best practices in the world, and integrates well-known and internationally accepted principles. This ensures that the corporate tax system in the UAE is easy to understand and its implications for the economy are clear.

Alhefeiti stated that, according to previous estimates issued by the credit rating agency Standard & Poor’s, taxes could add, starting in 2025, between 1.5% and 1.8% of the gross domestic product to the annual revenues of the UAE, based on the value-added tax model that grants the emirate 70% of the revenues collected and the remainder is for the federal government, which helps to diversify the UAE government’s revenues away from the oil sector.

Faisal Alhefeiti explained that corporate tax is one of the forms of direct taxes that apply to companies based in the UAE and other legal persons who are established in the UAE or who are effectively managed and controlled in it, or natural persons (individuals) who conduct business or business activity in the UAE. The UAE as specified in a decision to be issued by the Council of Ministers in due course, or non-resident legal persons (foreign legal entities) who have a permanent establishment in the UAE.

The scope of application of Corporate Tax includes legal persons established in free zones in the UAE as “taxable” persons, and they will have to comply with the requirements stipulated in the Corporate Tax Law. However, a person based in the free zone who meets certain conditions to be considered a qualifying person based in the free zone can benefit from a 0% corporate tax rate on his qualifying income, and may be subject to withholding tax at source (at 0%). Non-resident persons who do not have a permanent establishment in the UAE or who generate income arising in the UAE that is not related to their permanent establishment. At-source withholding tax is a form of corporate tax that is collected at source (origin) by the payer on behalf of the income recipient. Withholding taxes exist at source in many tax systems and are usually applied to cross-border payments of dividends or shares, interest, levies and other types of income, according to the text of the law.

Faisal Alhefeiti concluded his speech by saying: “The correct tax policy followed by the United Arab Emirates leads to a greater change in the total output of the economy, especially since the UAE uses tax policy as a tool to influence economic growth and investment, by developing and financing the environment and infrastructure and financing public services which has a positive impact on the economic climate that the UAE creates for all companies, which facilitates the best ways of investment, so that it can be said that the amount of tax paid by companies brings them an economic benefit of greater value than the value of the tax amount,” stressing that the UAE is sparing no effort to create a proper climate for businesses and provides the necessary incentives to launch new activities, while revising legislation, including taxes, in line with global standards.”

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About Faisal Saeed Alhefeiti

Alhefeiti worked as a dispute conciliator for many commercial and civil cases at Dubai Courts. He has a book entitled “The Role of the Federal National Council in the UAE Constitutional System” and a book entitled “Exceptional Conditions in Administrative Contracts in Law in the UAE.”

He is a registered lawyer with the UAE Ministry of Justice, a certified trainer from the Canadian International Center for Consulting and Training, and a certified legal advisor from the Supreme Council for Legal Affairs in the Egyptian Legal Consultants Association and specializes in studying legislation and the mechanism for amending it according to modern parliamentary systems.

He also obtained a doctorate in law with distinction and honors from Ain Shams University in the Arab Republic of Egypt, a master’s degree in public law, a diploma in legal sciences from Dubai Judicial Institute, and a certificate for research work and study of laws and regulations from the FHI360 Organization in the United States of American.

He previously worked in the UAE legislation in the Legislation and Oversight Sector at the Federal National Council, United Arab Emirates.