Corporate Tax

UAE To Introduce Corporate Tax Rate From 2023

UAE To Introduce Corporate Tax Rate From 2023

UAE To Introduce Corporate Tax Rate From 2023

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 rate starting 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 upcoming regulations to 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.

At Crowe UAE, our team of experts can help you in assessing the challenges and opportunities that the introduction of a Corporate Tax will bring.

Corporate Tax Rates are indicated in the below table:

SR.NO.

Taxable Income/ Category

Corporate Tax Rate (%)

1.

Taxable income up to AED 375,000

0%

2.

Taxable income over and above AED 375,000

9%

3.

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

Applicability to free zones and financial free zones:

  • Free Zone (including financial free zones) businesses in UAE will be subject to Corporate Tax. 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.

Applicability to foreign persons:

  • 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.

Applicability of Transfer Pricing Rules:

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 of 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.

How Crowe Can Help:

Although the press release and FAQ provided relevant information regarding some of the most relevant changes brought forward by the introduction of a UAE Corporate Tax, its technical aspects and specifics will only be known once official legislation is passed. Nevertheless, the current announcement by the UAE Ministry of Finance will change the tax landscape of the UAE Significantly and international groups with businesses in the UAE are advised to evaluate the impact of such development. At Crowe UAE, our team of experts can help you in assessing the challenges and opportunities that the introduction of a Corporate Tax will bring.

   A. Advisory services:

  • 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
  • Advise on whether any exemption can be availed
  • Advise on Group Corporate Tax and how to minimize potential risks
  • Advise on potential Corporate Tax risk areas and challenges faced by taxpayers
  • Assist in restructuring the business/operational model from the Corporate Tax perspective
  • Advise on availing Foreign Tax Credit paid by taxpayers in other countries
  • Advise on withholding taxes.

   B. Compliance Services:

  • Assist in registration for Corporate Tax before the relevant authorities
  • Computation of taxable income and corresponding Corporate Tax in UAE.
  • Preparation and filing of tax returns.

   C. Representation services:

  • 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.

Contact us for further assistance

Contact Us

Markus Susilo
Markus Susilo
Partner, Tax Advisory
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Binit Shah
Partner, Taxation & Technology
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Rushabh Vora
Director - Corporate Tax & Transfer Pricing
Alessandro Valente
Alessandro Valente
Manager - International Tax Service & Transfer Pricing