Want to know what the status is on foreign branch profits or dividends earned? Check out the guide from the Ministry of Finance. Image Credit: Vijith Pulikkal/Gulf News

Dubai: Want to know what’s in it for businesses under the UAE Corporate Tax?

Then, read all about it in a new ‘Explanatory Guide’ the Ministry of Finance has just brought out. It offers an article-by-article exposition on the intended effect of each provision under the tax, which comes into effect June 1 and will have companies taxed at 9 per cent on their annual income. Of course, with some exceptions too, notably for free zone businesses and those entities involved in the extraction, trading and other activities involving the country’s natural resources.

“The Ministry of Finance is working to provide clarity and guidance to those who are or may be subject to UAE's Corporate Tax, so they can understand the provisions of the law and why it is enacted,” said Younis Haji Al Khouri, Undersecretary of the Ministry of Finance.

“The Explanatory Guide reflects our continued commitment to ensuring taxable persons are supported and provided with information ahead of the law's entry into effect."

The Ministry has in recent days upped the pace of providing the market with new updates on various provisions, including notably on transfer pricing.

What does the Guide offer?

The new Guide details:

  • The 0 per cent withholding tax on cross-border and domestic payments;
  • Exemptions from corporate tax for foreign branch profits, dividends and capital gains earned from domestic and foreign shareholdings where the relevant conditions are met; and
  • Foreign tax credits on foreign-sourced income that is not exempt to avoid double taxation.
  • In addition, there are the targeted exemptions for certain entities subject to emirate-level corporate taxation or considered important to the social fabric of the UAE. These include government entities, investment funds, pension and social security funds, public benefit organisations and natural resource businesses.

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Tax relief

Key features included in the guide relate to the relief businesses that can tap for intra-group transfers and business restructuring transactions - but where the relevant conditions are met. Family foundations and trusts can be treated as ‘tax transparent’ to prevent personal wealth and investment income from being subject to Corporate Tax.

And there is the alignment of the calculation of taxable income to accounting profits, with limited adjustments to determine the corporate tax payable.

More to follow…