The corporate tax regime in the UAE is coming into force from June 1, 2023. The UAE CT law is a Federal Law aimed to tax profits of corporations and businesses. The rate has been set up at 9 per cent and is applicable to annual taxable income above Dh375,000. It applies to domestic corporations and in certain situations even to foreign companies. The law aims to strengthen the UAE’s position globally for businesses and investment, and adopts internationally acceptable practices. Several decisions for implementation of CT law have been issued and few more are expected soon.
The law comprises of 20 Chapters and 70 Articles. The Ministry of Finance has been organising awareness sessions and has recently issued an Explanatory Guide aiming to provide comprehensive commentary on the meaning and intended effect of each Article of the law. The Guide has to be read in conjunction with the law, decisions and the procedures and it may be updated and changed periodically. The guide will provide certainty over the provisions of the law and help businesses bridging their seamless and successful transition into Corporate Tax regime.
The Federal Tax Authority (FTA) being the implementing agency aims to launch few transformative projects for easier transition into the CT regime.
While the law provides for quite a competitive tax rate of 0 per cent and 9 per cent, along with simplified compliances, businesses need to perform a thorough assessment including review of their existing business models, contracts, cross-border transactions, inter-group transactions, etc. before transitioning to their first tax period. Any arbitrary arrangements with no commercial or economic substance aimed at obtaining a corporate tax advantage can be counteracted by FTA.
At MBG Corporate Services, our experts are working on tax impact, transfer pricing assessments, review of cross-border transactions, planning operational implementation for several businesses and can assist businesses in their preparedness assessment.
Please get in touch by writing to uae@mbgcorp.com
