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Dubai to consider decreasing government fees on commercial activities

Ministry announced plan to introduce federal corporate tax on business profits from June 2023.

Dubai will consider reducing government fees on commercial activities to further enhance the business environment in the emirate following the introduction of a federal corporate tax on business profits, Dubai’s media office said on Tuesday.

Dubai’s Department of Finance (DOF) said that is reinforcing its efforts to further improve the supportive, growth-friendly business environment for companies in the emirate, especially small and medium enterprises (SMEs), in the wake of a 9.0 percent federal corporate tax on business profits announced by the UAE Finance Ministry on Monday.

The new tax regime, which is part of the UAE’s ambitious diversification drive aimed at accelerating its economic growth, will come into effect from January 2023. The new taxation policy, to be implemented in line with international best practices, marks a significant shift in the UAE’s status as a tax-free haven for investors and corporates.

The DOF’s move to look at the possibility of gradually reducing fees on commercial activities in Dubai is under the directives of Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum, Crown Prince of Dubai and Chairman of The Executive Council of Dubai.

Abdulrahman Al Saleh, director general of the DOF, said the department’s efforts, which are aligned with the framework of financial federal laws, are aimed at enabling businesses to achieve greater success.

The DOF noted in a statement that corporate taxes are systematically applied in many countries around the world in ways that serve government interests and take into account the interests of companies in the long run. “The federal tax announced by the UAE Ministry of Finance on Monday, which will be at a low rate of nine per cent, is considered competitive and reflects best practices. It is among the lowest in the world and the lowest in the region.”

Al Saleh revealed a government programme to study all current and emergent variables related to the companies working in Dubai.

"Under the directives of our wise leadership, and within the framework of the Public Revenue Structuring Programme, DOF is reviewing the business fees contributing, along with other sources of public revenues, to the financing of government projects. The new reality requires us to study and review the government fees system, in order to facilitate businesses and entrepreneurial projects," Al Saleh said.

"The fees imposed by the Government of Dubai on commercial activities are affordable in the absence of corporate tax. Following the introduction of this tax, however, we will be keen, under the supervision of the General Secretariat of The Executive Council, to study those fees and look into the possibility of gradually reducing them in line with emergent trends," said Al Saleh.

The revenue structuring programme includes a comprehensive study of fees collected by all government entities within the framework of the government general budget, in order to serve the emirate’s aspirations to achieve sustainable development of government revenues and align them with the global best practices. The programme works to achieve revenue sustainability, and activate the fiscal policy of the emirate by supporting economic growth and the business environment.

The DOF said it would continue to work in cooperation with concerned authorities to develop policies that are considered ideal and attractive for foreign investments in key sectors, especially SMEs.

The DOF reiterated its support for free zone-based businesses and affirmed the continuation of current corporate tax incentives offered to companies within free zones that “comply with all regulatory requirements and do not conduct commercial activities in the UAE's mainland.”

issacjohn@khaleejtimes.com