The UAE has laid the groundwork for the introduction of Corporate Tax, a type of direct tax levied against the net income or profit of a business or company.
SSet to commence during the June 1, 2023 financial year, this federal law was initiated by the UAE Ministry of Finance on January 31, 2022. The corporate tax UAE legislative conforms to global best practices where businesses endure little to no compliance burden.
Elements of the Corporate Tax UAE
Under the Corporate Tax UAE system, the following elements apply:
1. Double taxation relief
This is in regard to foreign taxes and will be creditable against the Corporate Tax UAE Payable.
2. Transfer Pricing
Under the Transfer Pricing (TP) element, TP and documentation requirements will be applicable to UAE businesses as is contained in the guidelines of the OECD Transfer Pricing.
3. Fiscal unity and loss relief
It follows that the UAE group reserves the authority to elect and form a tax group that will be considered as being a single taxable individual for as long as certain criteria are met. In this regard, each group will only be expected to file one tax return. Nonetheless, group companies are allowed to offset each other’s tax losses for as long as set criteria are met.
While some of the most technical adjustments that the Corporate Tax UAE is expected to bring can only be understood after the legislation actually passes, the landscape of the UAE Ministry of Finance may not wait that long. As such businesses in the UAE must start evaluating how this change will affect them.
Rates of the Corporate Tax UAE
|Taxable Income (AED)||Corporate Tax UAE Rate (%)|
|0 – 375,000||0%|
|Large multinationals (having consolidated global revenue exceeding EURO 750 million – equivalent to AED 3.15 billion) that meet specific criteria set with reference to “Pillar Two” of the OECD Base Erosion and Profit Shifting Project||Different tax rate|
Exceptions of the Corporate Tax UAE Law
The effects of the Corporate Tax UAE legislative will be felt throughout the entire Emirates, applying to every business and income-generating activity, apart from:
- Natural resources extraction
- Employment income
- Real estate income
- Savings income
- Investment returns
- Income people earn in their individual capacity outside the UAE trade or business web
- Investment returns due to foreign investors
- Capital gains and dividends due to qualifying shareholdings
- Qualifying intra-group transactions and restructurings.
Companies to help you understand the potential impact of Corporate Tax UAE and its effect on your business
There are several audit and business solutions companies spread across different free zones in the UAE that can help you understand the Corporate Tax UAE better and how it may affect your type of business. Among their presenting solutions include:
- Conducting and delivering workshops and related technical training for you to the tax and finance teams in your organization or business.
- Performing several assessments in the range of qualitative impact and readiness or maturity evaluations. This targets the technical systems and governance aspects of your business.
- Performance of modeling work and associated quantitative assessment.
- Provision of implementation support in the areas of taxation, accounting, and systems.
Intellect Chartered Accountants
At the top of the list is Intellect Charted Accountants, featuring a team of auditors with decades of knowledge, skills, and experience under their belt. The company is a one-stop-shop for all things business solutions where regulation is concerned.
Intellect Chartered Accountants is one of the registered auditors in the UAE offering skill-targeted auditing and regulatory services. Their ultimate purpose is to help client companies sustain a morally upright operation where business and financial values are upheld.
Summary of services
● Corporate Tax impact assessment ad its application to your business
● Impact analysis of CT on Free Zone
● Exemption availability
● Group Corporate Tax and minimizing potential risks
● Potential Corporate Tax risk areas and challenges
● Restructuring your business/operational model from the CT perspective
● Availing of Foreign Tax Credit paid by taxpayers in other countries
● Withholding taxes.
● Registration for Corporate Tax before the relevant authorities
● Computation of taxable income and respective Corporate Tax in UAE.
● Tax returns preparing and filing.
● Preparing the written submissions to be furnished before tax authorities
● Filing the response against the notices received from tax authorities
● Filing of written appeal against the adverse tax adjustments made or penalty imposed by the tax authorities
● Representing the taxpayers before tax authorities and arguing on behalf of taxpayers.
It now becomes the responsibility of individual UAE-based businesses to evaluate how these regulations will affect them and their operations moving forward. It is also upon them to find ways to comply lest they find themselves on the opposite side of the law. To this end, it is important to find the ideal business solutions company that will help you through this critical transition.
The UAE Tax Authorities have already come out to publicize how non-compliance is punishable by law, citing consequences such as heavy penalties and license revocation. This heightens the stakes and companies have no alternative but to comply.
Corporate Tax is a kind of direct tax applied to a business’s net income or profit.
UAE’s Corporate Tax is expected to be effective starting on or after 1 June 2023
The corporate tax is one of UAE’s attempts to solidify its position as a frontline global hub for business and investment. It is also geared at accelerating the region’s development while at the same time facilitating transformation so that UAE’s strategic objectives can be achieved.
There are many countries that already have a corporate tax system already in place. These include Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and now the United Arab Emirates. All these countries are members of the Gulf Cooperation Council (GCC).
The UAE CT regime will go as far as affecting the entire Emirates mainly because it is a federal tax. The Federal Tax Authority will be in charge of administering, collecting, and enforcing the UAE CT.