DUBAI: The United Arab Emirates will introduce a federal corporate tax on business profits starting from June 1, 2023 for the first time, the Finance Ministry announced on Monday, but kept a low base to maintain its attractiveness for businesses.

A ministry statement carried by state news agency WAM said the tax will be levied on all corporations and commercial activities in the country, except for the "extraction of natural resources" which will remain subject to taxation at the emirate level.

The move comes as the oil producer continues to diversify sources of revenue away from oil revenue.

In 2018, the UAE introduced value added tax on most goods and services at a standard rate of 5%.

The ministry said the new regime implies a standard statutory tax rate of 9%, as well as a 0% rate for taxable profits up to 375,000 dirhams ($102,107.50) in order to support small businesses and startups.

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Businesses in the UAE, a regional financial hub, are exempted from paying taxes on capital gains and dividends received from shareholdings, it said.

The new programme left intact the exemption for individuals from income tax, capital gains tax on real estate and other investments, and other earnings that do not come from a business.

The UAE corporate tax regime will continue to honour the corporate tax incentives currently being offered to free zone businesses that comply with all regulatory requirements and that do not conduct business with mainland UAE, the ministry said.

"Given the position of the UAE as a global financial centre and an international business hub, the UAE Corporate Tax regime will support investment and headquarters activities and ensure the free flow of capital, trade, financing, and services," added the ministry in the statement posted on its website.

"With a standard statutory tax rate of 9% and a 0% tax rate for taxable profits up to AED 375,000 to support small businesses and startups, the UAE Corporate Tax regime will be amongst the most competitive in the world."

The ministry stated that businesses will have ample time to prepare for the introduction of the Corporate Tax, and further information on the UAE Corporate Tax regime will be provided towards the middle of 2022 to help businesses get ready and be fully compliant.