Moody’s Says New #UAE Tax is Credit Negative for Companies - Bloomberg

Moody’s Says New UAE Tax is Credit Negative for Companies - Bloomberg

The UAE’s plan to introduce a corporate tax will broaden the government’s income base but negatively affect the credit profiles of companies operating in the Middle East business hub, Moody’s Investors Service said.

The Gulf oil exporter announced Monday it would impose a 9% federal tax on corporate earnings from June 2023 as it seeks to shed its reputation as a tax haven and bring itself in line with changing global standards. The step is the most significant since 2018, when the country introduced value-added tax, the credit rating company said in a statement.

“The introduction of the 9% federal corporate tax is broadly credit negative for domestic UAE corporates because it will reduce their operating cash flows,” according to Moody’s. “However, the overall impact on the credit profile of large corporates will be muted because they have several offsetting levers, such as increasing product or service prices, optimizing their cost structure and reducing shareholder dividends.”

Stocks traded in Dubai and Abu Dhabi dropped after the announcement as investors said the move would hit net earnings.