DUBAI, United Arab Emirates — The United Arab Emirates will be introducing a federal corporate tax on business profits for the first time, the Ministry of Finance announced Monday.

This news is a major shift in a country which has long been a magnet for businesses around the globe due to its tax-free status. The tax will apply to businesses starting June 1, 2023.

The country will have a statutory tax rate of 9% on taxable income over 375,000 United Arab Emirates dirhams ($102,000) and zero on taxable income under that amount, the ministry announced. It also stated that the UAE’s corporate tax regime would be the most competitive anywhere in the world.

According to the ministry, individuals won’t be subject to any taxation on their earnings from investments in equity, employment or real estate. Foreign investors that do not conduct business within the UAE will also be exempt from this tax.

What is profit? Corporate tax applies to the “adjusted accounting net profits” of a business.

Free zone business, meanwhile — thousands of which exist in the country — can “continue to benefit from corporate tax incentives” as long as they “meet all necessary requirements,” the ministry said, without elaborating. Companies in the UAE’s free zones enjoy zero taxes, full foreign ownership and many other benefits.

The UAE Corporate Tax regime was created to include best practices internationally and minimize compliance burden for businesses,” WAM, a state-run news agency wrote.

Corporate tax will apply to profits made by UAE companies as per their financial statements, which were prepared according to internationally accepted accounting standards. There are minimal adjustments and exceptions. Except for extraction of natural resources, the corporate tax will apply equally to all commercial and business activities.