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Tax Consultancy / VAT Consultancy /

Corporate Tax in UAE

On 8th October 2021, the United Arab Emirates (“UAE”) (amongst 137 countries) agreed to implement the OECD’s Two-Pillar approach to reform its International Tax Framework and to implement a minimum Corporate Tax in UAE rate starting in 2023. Following this development, on 31 January 2022, the Ministry of Finance of the UAE announced the introduction of a Federal Corporate Tax regime on business profits effective for Financial Years starting on or after 1 June 2023.

Corporate Tax in UAE is a form of direct tax levied on the net income or profit of corporations and other businesses. Going forward, licensees operating in UAE will be required to assess the impact of the regulations on their business and undertake the necessary compliance. On this note, the UAE Tax Authorities have already stated that non-compliance will translate to crippling penalties.

UAE

Corporate Tax

Below are the corporate tax rate applicable

  • Tax rate @ 0% for Taxable income up to AED 375,000
  • Tax rate @ 9% Taxable income over and above AED 375,000
  • Different tax rate for 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

Free Zone (including financial free zones) businesses in UAE will be subject to Corporate Tax in UAE. However, it has been clarified that the 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 in mainland UAE. Businesses established in a free zone will be required to register and file a Corporate Tax Return and Accounting services.

Foreign entities and foreign individuals will be subject to Corporate Tax only if they conduct a trade or business in the UAE in an ongoing or regular manner.

Moreover, Corporate Tax in UAE will generally not be levied on a foreign investor’s income derived from dividends, capital gains, interest, royalties, and other investment returns. Transfer Pricing rules and documentation requirements will now be aligned with the OECD Transfer Pricing Guidelines i.e., Master File and Local File. Documentation will require groups of companies to perform benchmarking searches to justify their pricing policies for inter-company transactions. We wait for further details/clarifications on potential exemptions for qualified intra-group transactions and other compliance requirements that may be introduced.

our team of experts can help you in assessing the challenges and opportunities that the introduction of a Corporate Tax will bring in the following manners.

  • Impact assessment of Corporate Tax on business and applicability thereto
  • Analysis of the impact of Corporate Tax on Free Zone (including Financial Free Zone) entities
  • Advice on whether any exemption can be availed
  • Advice on Group Corporate Tax and how to minimize potential risks
  • Advice on potential Corporate Tax risk areas and challenges faced by taxpayers
  • Assist in restructuring the business/operational model from the Corporate Tax perspective
  • Advice on availing Foreign Tax Credit paid by taxpayers in other countries
  • Advice on withholding taxes.
  • Assist in registration for Corporate Tax in UAE before the relevant authorities
  • Computation of taxable income and corresponding Corporate Tax in UAE.
  • Preparation and filing of tax returns.
  • Preparing the written submissions to be furnished before tax authorities
  • Assisting in 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.

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