It’s a year of significant change in the UAE this year. As UAE citizens prepare for the new year, the following legislative reforms are being introduced, to take effect throughout the year.
Here are the laws that will take effect the following year and what I consider their significance to be.
9% Corporate Tax
This is scheduled to go into effect in June of the following year. Companies that make a profit of AED 375,000 or more per year will be subject to a 9 percent tax starting in June 2023. Only the profit element of the balance sheet will be subject to the tax; the company’s overall turnover will be exempted, and citizens’ salaries are exempt from the law’s application. If their income exceeds the established threshold, persons with a freelancing visa must also pay corporate tax. It also won’t apply to income obtained by bank deposits, savings plans, investments, dividends, etc.
What is exempted from corporate tax in the UAE?
The following are exempt from the newly introduced Corporate Tax:
- Salary of working residents
- The operations of government entities (with the exemption of business activities)
- Qualifying Free Zone companies
- Investment capital
- Pension plans
- Public organizations
- Individual bank deposit income
- Gains in foreign currencies
- Savings schemes
I believe that this is the beginning of an established taxation structure in this region. I don’t feel that taxation will start and end at corporate level, and I think that the path could well be paved for income tax to be introduced in the future. Nonetheless, I expect Dubai to remain competitive and strike the perfect balance between rewarding citizens and setting appropriate taxation levels.
This is a mandatory plan that allows employees who lose their job to receive 60% of their base pay in exchange for paying a premium of either Dh60 (Dh5 per month) or Dh120 (Dh10 per month), depending on which category they fall into.
It starts from January 1, 2023; however, according to the information revealed, to be qualified for benefits under the insurance plan, you must have worked a minimum of 12 months continuously in your prior position starting on the day you signed up for it, so do bear that in mind.
The insurance program has two categories: the first is for workers whose basic salaries are Dh16,000 or less, and the second is for those whose basic salaries are Dh16,000 or more. You can earn 60% of your primary income for up to three months after losing your job if you sign up for the insurance program, which is a very progressive system indeed.
Since a while ago, this subject has gained popularity, and by 2023, private UAE enterprises with at least 50 employees must achieve a two percent Emiratization target. The UAE Cabinet adopted the resolution in May of this year to generate more than 12,000 new job opportunities for UAE citizens per year across all economic sectors.
Beginning in January 2023, non-compliant businesses will be required to pay a fee of Dh6,000 per month for each individual who has yet to be employed.
This ruling is, I believe, a positive step. There is a lot of Emirati talent waiting to be utilised, and this ruling should give the nudge required in the right direction for businesses to commit to Emiratisation. Our business is very lucky to have very talented Emirati employees, and I for one welcome this change.
Ban on Single-Use Plastic
Beginning in January 2023, the emirates of Ajman and Umm Al Quwain plan to ban single-use plastics. Starting in 2023, retail establishments must charge 25 Fils for each plastic bag that customers use. Customers are required to pay 25 Fils per bag at stores in Abu Dhabi, Dubai, and Sharjah to reduce the nation’s reliance on plastic bags and single-use packaging.
With the landscape changing for business setup, you may feel the need to lean on expert support with establishing your new venture. For the best advice on how to launch your business in the United Arab Emirates, connect with us to get it right first time.
In the meantime, Business Incorporation Zone is always available to assist you and your company in keeping up to date with the most recent reforms to UAE law.