The United Arab Emirates will establish a federal corporation tax on company earnings for the first time on June 1, 2023, the Finance Ministry stated on Monday, but will keep the base low to retain its appeal to firms.

According to a ministry statement reported by official news agency WAM, the tax would be applied on all businesses and commercial operations in the nation, with the exception of “natural resource exploitation,” which will continue to be taxed at the emirate level.

The move comes as the oil producer continues to diversify its revenue streams away from oil.

In 2018, the UAE imposed a 5% value added tax on most products and services.

According to the ministry, the new system entails a basic statutory tax rate of 9%, as well as a 0% rate for taxable earnings up to 375,000 dirhams ($102,107.50) in order to encourage small firms and entrepreneurs.

According to the report, businesses in the UAE, a regional financial powerhouse, are immune from paying taxes on capital gains and dividends earned from shareholdings.

Individuals are still excluded from income tax, capital gains tax on real estate and other assets, and other profits that do not originate from a corporation under the new scheme.

According to the ministry, the UAE corporate tax regime would continue to recognize the corporate tax benefits presently being granted to free zone enterprises that comply with all legal requirements and do not conduct business with mainland UAE.