Economic situation and tax adjustments in the UAE
— Press release —
The United Arab Emirates (UAE) is currently facing a challenging economic phase influenced by various factors. An expected increase in oil prices between 2020 and 2023 has partially materialized and strengthened the UAE's position, especially considering the global energy supply situation. These developments are particularly important as they are expected to help support Dubai's economy, which heavily relies on the real estate market.
Lower economic growth is anticipated across the Gulf region in 2023 due to the risks of a global recession and geopolitical tensions. Nevertheless, the International Monetary Fund (IMF) forecasts real GDP growth of 3.5% for the UAE. This would position the UAE among the countries with the highest real growth among the GCC states.
The non-oil sector, in particular, is expected to grow by 4.2%, driven by increased demand in tourism, real estate, construction, and transport. Additionally, significant investments in rail infrastructure are expected. Inflation is projected to be 3.5%, which is considered low by international standards. However, the newly introduced corporate income tax could potentially dampen economic growth and increase inflation in the short term.
In 2023, the Abu Dhabi Foreign Trade and Investment Centre is focusing on the renewable energy and environmental technology sectors. The construction and infrastructure sectors, as well as food and beverages, also retain their significance. This focus reflects the UAE's efforts to invest in forward-looking and sustainable industries.
Progressive Emiratisation is becoming increasingly important. Private sector companies are legally required to increase their Emirati workforce. As of July 7, 2023, 79,000 Emiratis were working in the private sector, according to the Ministry of Human Resources and Emiratisation (MoHRE). The government announced in July 2023 that companies with 20 to 49 employees must now also hire at least one Emirati by the end of 2024 and at least two Emiratis by the end of 2025.
The UAE is intensifying efforts to attract foreign investment to promote sustainable economic growth. Various measures have been taken to this end, and the establishment of a separate Ministry of Investment was even announced in July 2023. Additionally, a federal corporate income tax came into effect on June 1, 2023. This tax applies to profits earned in financial years starting after June 1, 2023, and is set at 9% for profits above AED 375,000 (approximately EUR 90,000). It applies to all companies and commercial activities in the UAE conducted by legal entities or individuals in the seven emirates.
(Source: Vienna Chamber of Commerce)