Corporate Tax Overview
The UAE introduced a 9 percent federal corporate tax in June 2023, ending its status as a zero-tax jurisdiction for mainland businesses. The rate remains the lowest in the GCC among countries that levy corporate income tax, preserving the UAE’s tax competitiveness while aligning with global minimum tax standards.
| Country | Corporate Tax Rate (%) | Applies To | Free Zone Exemptions | Effective Date |
|---|---|---|---|---|
| UAE | 9 | All businesses >AED 375k profit | Qualifying income at 0% | June 2023 |
| Saudi Arabia | 20 | Foreign-owned businesses | SAGIA licensed, some zones | Longstanding |
| Qatar | 10 | All businesses (non-GCC owned) | QFC entities at 10% | Longstanding |
| Kuwait | 15 | Foreign-owned businesses | None | Longstanding |
| Bahrain | 0 (proposed changes) | N/A currently | N/A | Under review |
| Oman | 15 | All businesses | SEZ incentives available | Longstanding |
VAT Implementation Status
| Country | VAT Rate (%) | Implementation Date | Annual Revenue (USD bn, est.) | Exemptions |
|---|---|---|---|---|
| UAE | 5 | January 2018 | 7.2 | Healthcare, education, residential |
| Saudi Arabia | 15 | January 2018 (5%), July 2020 (15%) | 18.6 | Limited |
| Bahrain | 10 | January 2019 (5%), January 2022 (10%) | 1.4 | Food staples, healthcare |
| Oman | 5 | April 2021 | 1.8 | Healthcare, education, food |
| Qatar | None | No implementation date | N/A | N/A |
| Kuwait | None | Delayed indefinitely | N/A | N/A |
Excise Tax Comparison
| Product | UAE | Saudi Arabia | Bahrain | Oman | Qatar | Kuwait |
|---|---|---|---|---|---|---|
| Tobacco (%) | 100 | 100 | 100 | 100 | 100 | None |
| Carbonated Drinks (%) | 50 | 50 | 50 | 50 | 50 | None |
| Energy Drinks (%) | 100 | 100 | 100 | 100 | 100 | None |
| Sweetened Beverages (%) | 50 | 50 | 25 | None | None | None |
| E-Cigarettes (%) | 100 | 100 | 100 | 100 | None | None |
Personal Income Tax
No GCC country levies personal income tax on employment income. This remains a defining feature of the Gulf’s talent attraction model and a critical competitive advantage against global financial centres.
| Country | Personal Income Tax | Social Security (Nationals) | Social Security (Expats) |
|---|---|---|---|
| UAE | None | GPSSA contributions | None |
| Saudi Arabia | None | GOSI 22% (employer/employee split) | GOSI 2% (employer) |
| Qatar | None | None mandatory | None |
| Kuwait | None | PIFSS contributions | None |
| Bahrain | None | SIO 19% (employer/employee split) | SIO 4% (employer/employee) |
| Oman | None | PASI contributions | None |
Global Minimum Tax (OECD Pillar Two) Readiness
The OECD’s 15 percent global minimum tax framework is reshaping GCC fiscal strategy, particularly for countries with effective rates below this threshold.
| Country | Current Effective Rate | Pillar Two Exposure | QDMTT Planned | Timeline |
|---|---|---|---|---|
| UAE | 9% | High (MNEs in free zones) | Under consideration | 2026-2027 |
| Saudi Arabia | 20% | Low | Monitoring | N/A |
| Qatar | 10% | Moderate | Under study | TBD |
| Kuwait | 15% | Low | N/A | N/A |
| Bahrain | 0% | Very High | Active development | 2025-2026 |
| Oman | 15% | Low | N/A | N/A |
Fiscal Policy Direction
The GCC is converging toward broader tax bases as hydrocarbon revenues become less predictable. The UAE’s approach balances revenue generation with competitiveness preservation, maintaining the lowest corporate rate while building administrative capacity for future fiscal tools.
Saudi Arabia’s 15 percent VAT and 20 percent corporate tax on foreign entities represent the most aggressive taxation stance in the GCC. This creates a natural arbitrage opportunity that benefits the UAE’s lower-rate environment for cost-sensitive businesses.
Strategic Implications
The UAE’s 9 percent corporate tax rate positions it at the optimal point between global compliance requirements and regional competitiveness. The key risk is upward rate pressure from Pillar Two implementation, which may require a domestic top-up tax for qualifying multinational groups. The strategic response should focus on maintaining the gap between UAE and Saudi effective rates while building non-tax competitive advantages in regulatory efficiency and business environment quality.