The UAE will not introduce an employee income tax, Thani Al Zeyoudi, Minister of State for Foreign Trade, said on Monday.
“It is not at the table at all now,” Mr Al Zeyoudi told Bloomberg TV.
The UAE will introduce a 9 per cent federal corporate tax on the profit of businesses from the financial year starting on or after June 1, 2023, the Ministry of Finance said on January 31.
The corporate tax regime will be among the most competitive and will be in line with World Trade Organisation rules, the ministry said.
There will be no tax on personal income “from employment, real estate and other investments, or on any other income earned by individuals that does not arise from a business or other form of commercial activity licensed or otherwise permitted to be undertaken in the UAE”, the ministry said at the time.
The UAE’s new corporate tax has been received in a “very positive manner by businesses in general”, Mr Al Zeyoudi said.
“We have to comply with international directions. The Organisation of Economic Co-operation and Development announced last year that most of the world is going to apply it [corporate tax].
“We are connected to the world with all the reforms we have done lately.”
Last October, the OECD said 136 countries had agreed to a global deal to ensure big companies pay a minimum tax rate of 15 per cent from 2023.
Under the worldwide accord, countries will collect about $150 billion in new tax revenue annually, while $125bn in multinationals' profits will be reallocated to the countries in which they operate, the OECD said.
The new minimum tax rate will apply to companies with revenue of more than €750 million ($868m).
The levy is set to replace “most of the fees” companies currently pay and is one of the lowest in the world, Mr Al Zeyoudi said.
The Ministry of Finance is expected to announce more details about how the corporate tax will be imposed in the next few weeks, he said.
The minister also ruled out that the corporate tax levy would have an effect on inflation in the UAE.
Corporate tax is levied by governments on a business’s profits, which are the difference between a company’s revenue and costs.
The UAE's move to introduce corporate tax complies with the initiative on a global minimum tax, Egyptian investment bank EFG Hermes said.
The initiative reflects efforts by global economies to reduce worldwide tax evasion, especially by companies, it said.
In countries that have personal taxation, people pay income tax on their earnings, said Keren Bobker, an independent financial adviser and senior partner with Holborn Assets in Dubai.