• Taxation
• 2023-01-09
• Mr. Waseem

What will be the Impact of the Proposed UAE Corporate Tax on Free Zone and Mainland Firms?

The United Arab Emirates has recently announced plans to introduce a corporate tax on free zone and mainland firms. This proposal has generated a significant amount of discussion and speculation about the potential impacts of such a tax. In this article, we will explore some of the possible consequences of the proposed UAE corporate tax on free zone and mainland firms.

What is the impact of corporate tax?

One of the main impacts of the proposed corporate tax is likely to be an increase in the cost of doing business in the UAE. Companies operating in the UAE’s free zones have historically benefited from a range of tax incentives, including exemptions from corporate income tax and value-added tax. The introduction of a corporate tax would mean that these companies would no longer enjoy these benefits, and would instead be required to pay a tax on their profits. This could make it more expensive for free zone companies to do business in the UAE, potentially leading to a reduction in profits or an increase in prices for goods and services.

Another potential impact of the proposed corporate tax is that it may discourage companies from setting up operations in the UAE’s free zones. Many companies are attracted to the UAE’s free zones due to the favourable tax treatment they receive, and the introduction of a corporate tax could reduce the attractiveness of these zones as a business location. This could lead to a decline in the number of companies operating in the free zones, which could have negative consequences for the local economy.

It Is also worth considering the potential impact of the proposed corporate tax on mainland companies in the UAE. While these companies have always been subject to corporate income tax, the introduction of a new corporate tax could lead to an increase in their tax burden. This could make it more difficult for mainland companies to compete with their counterparts in other countries, as they would be required to pay a higher tax rate on their profits. This could potentially lead to a decline in the competitiveness of mainland companies in the UAE, which could have negative consequences for the local economy.

When it will be started?

It is important to note that the proposed corporate tax has not yet been implemented and will start from 1st June 2023, and it is not yet clear exactly how it will be structured or how much it will be. It is therefore difficult to predict with certainty the exact impact that the tax will have on free zone and mainland firms in the UAE. However, it is likely that it will have some impact on the cost of doing business in the UAE, and it could potentially lead to changes in the business environment in the country.

Where can you file your corporate tax?

You can file corporate tax yourself but we suggest you to consultant with corporate tax expert which can help you for it. 

Conclusion:- With the proposed UAE corporate tax on free zone and mainland firms is likely to have a range of impacts on the local business environment. It may increase the cost of doing business in the UAE, discourage companies from setting up operations in the free zones, and make it more difficult for mainland companies to compete with their counterparts in other countries. While the exact consequences of the tax are not yet known, it is clear that it will have some impact on businesses operating in the UAE.