The UAE is introducing <a href="https://www.thenationalnews.com/business/economy/2023/05/26/what-you-need-to-know-about-the-uaes-corporate-tax/">corporate income tax</a> on Thursday, a step that will not only help the Arab world’s second-largest economy broaden its revenue base, but will also help the country achieve its long and short-term economic growth objectives. The move will increase the country's <a href="https://www.thenationalnews.com/business/economy/2023/05/26/what-you-need-to-know-about-the-uaes-corporate-tax/">taxation scope</a> beyond VAT and different custom duties and complements government efforts to diversify its economy from oil, <a href="https://www.threads.net/@thenationalnews.com" target="_blank">analysts</a> say. “It is a very positive development and shows continued focus on diversifying various areas of the economy, including revenue base of the government,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank. Measures such as the introduction of <a href="https://www.thenationalnews.com/business/economy/2022/10/29/uae-finance-ministry-amends-some-provisions-of-vat-law/">VAT in 2018</a> and of corporate law last year were aimed at “strengthening the near and medium-term fiscal framework”, she added. Ushering in the corporate tax regime is another step in that direction by the UAE, which has laid out its next 50-year growth agenda. The country plans to double its economy <a href="https://www.thenationalnews.com/business/economy/uae-aims-to-double-size-of-economy-to-dh3tn-by-2031-minister-says-1.1214718">to Dh3 trillion ($816.8 billion) by 2031</a>, as it continues to recover from the coronavirus pandemic-driven slowdown and maintains a robust growth momentum. “The UAE is moving ahead with various economic reforms at the same time and that is building the economic resilience,” Ms Malik said. “The trade agreements, the focus on urban development, renewable energy and the strengthening of the fiscal framework are all progressing concurrently.” In January 2022, the UAE introduced the federal corporate tax with a standard statutory rate of 9 per cent, which comes into effect for businesses whose financial year starts on or after June 1 this year. <a href="https://www.thenationalnews.com/business/2022/12/09/uae-issues-corporate-tax-law-paving-way-for-implementation-in-2023/">In December</a>, the country issued the federal <a href="https://www.thenationalnews.com/podcasts/business-extra/2022/02/01/new-corporate-tax-in-the-uae-explained-business-extra/">corporate tax law</a>, bringing the income of companies exceeding Dh375,000 in the corporate tax bracket. Taxable profits below that threshold will be subject to a zero per cent rate. No corporate tax will apply on <a href="https://www.thenationalnews.com/business/money/2022/01/06/uae-salary-guide-2022-how-much-should-you-be-earning/">salaries</a> or other <a href="https://www.thenationalnews.com/business/money/2022/01/31/why-employees-will-continue-to-pay-no-income-tax-in-the-uae/">personal income</a> from employment – be it in the government, semi-governmental or private sector, the Ministry of Finance said at the time. The UAE's corporate tax regime is based on a self-assessment principle, which means businesses are required to ensure that the documents submitted to the Federal Tax Authority are correct and comply with the law. The new tax regime allows a generous compliance period, for example, businesses with a financial year starting on June 1, 2023, and ending on May 31, 2024, will have until February 28, 2025, to file their tax returns and make payments. The introduction of the tax is part of the UAE’s efforts to add new revenue streams and allow the government to bolster its fiscal buffers, Khatija Haque, chief economist, and Jeanne Claire Walters, senior economist at Emirates NBD said in a research report in February. Emirates NBD expects hydrocarbons to remain an “invaluable source” of revenue for the government for many years to come. However, a declining in oil price in 2020 on the back of the pandemic underlined the need for a more broad-based approach. “Following on from VAT, it is an important step towards broadening the tax base. This will help insulate against swings on oil prices and give some additional solidity to revenues," Scott Livermore, chief economist at Oxford Economics Middle East, said. The new tax will help the UAE increase the share of non-oil revenue to the government's overall budget revenue and will “increase the tax revenue-to-gross domestic product ratio – currently estimated at around 15 per cent of GDP", said Aathira Prasad director of macroeconomics at Nasser Saidi & Associates. “This will also provide added support to the UAE's efforts towards greater fiscal consolidation.”