Corporate Tax and Compliance Summit held in Dubai

The introduction of corporate tax (CT) in the UAE, effective from June 2023, marks a significant step in the nation’s evolution as a global business hub. Corporate tax is a form of direct tax levied on the net income or profit of corporations and other entities from their business. With the introduction of the CT, the UAE aims to cement its position as a leading global hub for business and investment; accelerate its development and transformation to achieve its strategic objectives; and reaffirm its commitment to meeting international standards for tax transparency and preventing harmful tax practices.

The Corporate Tax and Compliance Summit (CTCS), held on October 8 and 9, 2024, at Address Sky View, Downtown Dubai, brought together industry leaders, tax experts, and stakeholders to help provide clarity and fresh perspectives on this new tax regime, while discussing regulatory updates, and exploring innovative strategies.

Organised by Meydan Free Zone and supported by Gulf News as the Media Partner, the summit’s expert-led sessions offered a comprehensive overview of corporate tax (CT) regulations, providing actionable insights and answering critical questions around compliance.

Key speakers at the event included Khalid Alzaabi, Senior Specialist, AML Executive Office; Sadeq Khatib, Senior Tax Studies and Reports Expert, Department of Finance; Sachith Amarasekara, Director of Forensics, KPMG; Alia Noor, Associate Partner in Taxation and Compliance Advisory, Ahmed Alagbari Chartered Accountants; Liam Purcell, Senior Council, Aurifer; Nirav Shah, Founder and Managing Director, FAME Advisory, DMCC; Shamseer Purayil - Anti Money Laundering Senior Specialist, Ministry of Economy, and Shiraz Khan, Partner and Head of Tax Middle East, Al Tamimi & Co.

With discussions that not only cleared doubts but also introduced forward-looking strategies for adapting to the new tax environment, the event was clearly a great success.

Attendees received a better understanding of how to navigate the compliance landscape, armed with the latest regulatory updates and practical advice to help their businesses thrive in this evolving tax regime.

Speaking to Gulf News on the sidelines of the event, Nirav Shah of FAME, clarified a query some attendees had regarding registration for CT. “Registration for CT is required for all registered companies in the UAE— there are no exemptions. It’s crucial to understand that once a company is registered in the UAE, whether in the free zone, offshore, or elsewhere, compliance becomes necessary.”

He also threw light on the difference between VAT and CT: “VAT is based on the consumption of goods or services, meaning the consumer ultimately pays the VAT. For a business, VAT is not a cost; it’s a compliance issue. However, CT is different — it’s a direct cost for the business, unrelated to the goods or services it deals with.”

In the new scenario, businesses must adopt a more disciplined approach, ensuring accurate revenue recognition and proper bookkeeping. “Without this discipline, their tax compliance will be incorrect. So, the major challenge is changing the mindset and embracing these new compliance standards,” he said.

The corporate tax regime is not designed to favour either SMEs or multinationals — it applies to both equally, said the tax expert. “The compliance requirements have been kept at a bare minimum level to reduce the burden.”

To a question on how CT guidelines for free zones align with the UAE’s broader economic vision and business-friendly environment, Sadeq Khatib, Senior Tax Studies and Reports Expert, Department of Finance, said: “Free zones offer certain benefits, including the 0 per cent tax rate for companies that meet specific criteria. However, to align with international requirements, the UAE has introduced conditions such as engaging in qualifying activities and maintaining the de minimis thresholds. Compliance plays a crucial role in meeting these international standards and is central to the UAE’s broader economic vision.”

Alia Noor of Ahmed Alagbari Chartered Accountants spoke on the importance of firms conducting due diligence and being vigilant, sometimes extra vigilant, when dealing with clients.

“To be vigilant, firstly you need to comply with the laws and regulations. Secondly, if you're in anti-money laundering, you must do the screening — this is very basic. If you miss something, you will be penalised. The third thing is timely filing and reporting. For instance, if you notice any suspicious transaction, you need to alert and report it to the authorities concerned [at the earliest]. There are heavy penalties for non-compliance with these deadlines,” she said.

To protect and safeguard their reputation, companies should avoid any involvement in illegal transactions. “They should avoid doing business with individuals or entities engaged in questionable activities. Vigilance is key — that’s the basic requirement,” she reiterated.

Companies should be prepared for audits and take the right steps to ensure their books are in order. “Importantly, businesses must keep records for seven years. Documentation is crucial. Under CT, you must comply with the arm’s length transaction rule, which deals with transfer pricing. You need to prove that transactions with connected persons or related parties are at market rates and that there is no tax evasion or abuse. Vigilance in maintaining proper documentation is key.”

Liam Purcell, Senior Counsel, Aurifer, threw light on several aspects of CT. “One of the great things about the UAE is its extensive double tax treaty network,” he said. “These agreements allow companies to reduce or eliminate double taxation on certain categories of income earned abroad.’’

He also touched upon how the CT regime impacts small and medium enterprises (SMEs). “The CT law provides some incentives for SMEs,’’ said Liam. “For example, there is small business relief available for entities earning less than Dh3 million in revenue. Additionally, smaller businesses can use the cash basis of accounting rather than the accruals basis, which is the standard for larger entities. The thresholds for preparing full-scale transfer pricing documentation are also quite high, which helps reduce the compliance burden on smaller businesses. We might see further measures introduced over time, but it’s clear [the authorities] have considered the needs of smaller businesses in this regime.’’