The UAE’s Corporate tax is a step towards future business credibility


For a long time, the United Arab Emirates (UAE) had been stuck in the stereotype of an oil-based economy.

However, Dubai has worked deliberately over the years to assist the country to untangle itself and establish itself as a modern state through significant expenditures in innovation and technology.

Since then, the Gulf nation has been in the spotlight, implementing a series of reforms to align itself with the global community, the most recent of which is a federal corporate tax of 9%, which complies with the Organization for Economic Cooperation and Development’s international tax standards template (OECD).

Industry experts and financial analysts applaud the introduction of corporation tax, arguing that it will provide the UAE – the indisputable economic engine of the Middle East and North Africa (MENA) region – even more pressure to progressively reduce its reliance on traditional fossil-fuel revenue.

“I’ve heard some claims that the corporate tax is a barrier to investors. They make no sense at all. Instead, I believe the decision will enhance the UAE’s economy significantly, as the country will become a fertile ground for well-meaning firms and corporate behemoths,” said K.V.Mohan Menon, a former geopolitical and economic adviser to the UAE.

Menon, a former investment banker who is now the chairman of Kerala-based SDF Industries Ltd, has lived and worked  in several places, including the Gulf area. He claims that when Singapore, which was formerly a tax haven, adopted a 17 percent tax, everyone thought it was over. “However, where is Singapore right now?” So these apocalyptic prophecies don’t hold much water for me,” Menon admits.

Menon, a businessman with international contacts and a close observer of the Middle East region, is unsurprised by the UAE’s new move. “Last year, the government became a party to a global treaty that set a minimum tax rate of 15% for large corporations and multinationals.”

As a result, it is only in lines that are expected. “The only surprise, if you can call it that,” he says, is the UAE’s decision to set the tax rate at 9%.

Experts estimate that the UAE’s new corporate tax will bring in an additional $ 13 billion in revenue to the government coffers.

Even yet, Menon claims that it will have no detrimental impact on startups because only enterprises outside of free zones with profits over Dh.375,000 are subject to taxation.

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