Corporate Tax is Announced. What’s next for your Business?
While the country’s tax-free status has always attracted global business to setup here in UAE, the finance ministry said new tax regime will be “amongst the most competitive in the world.”
UAE Corporate Tax regime has been designed to incorporate best practices globally and minimize the compliance burden for UAE businesses. Corporate Tax is announced to be levied from June 1st 2023.
Essentials of the new Tax Regime
With the onset of a new tax, every individual and business establishments would be circling around countless questions and not being able to get a hold of the exact matter to be concerned about. So put aside those worries and have a quick read over the salient features of Corporate Tax.
- CIT regime won’t be applicable to individuals with salaried income, personal investments & real estate investments in personal capacity. However, those engaged in industrial, commercial/business or professional income including freelancers will fall under the CIT regime.
- All business entities or individuals with license to carry out business in the UAE will be taxed at 9% only if the accounting net profit of the entity for the year exceeds AED 375,000. However the MNEs that come under the Pillar 2 criteria, will be having a different tax rate.
- Establishments involved only in extraction of natural resources are granted exemption from the CIT but will continue to be taxed as per the Emirate level Corporate Taxation. It is to be kept in mind that the activities such as refining, blending, storage, distribution of natural resources will attract the new CIT regime.
- Below mentioned incomes are exempted from Corporate Income tax scheme:
- Dividend income of businesses in UAE from their qualifying shareholdings
- Capital gains earned by businesses in UAE from their qualifying shareholdings
- Net profits of a foreign branch in UAE provided they are taxed under the foreign jurisdiction
- Intra-group transactions
- Income by way of transfer of shares in Acquisitions, Mergers and Reorganizations
- Free zone entities will also fall under the CIT regime, with continued benefits and incentives as currently provided & will also be required to file returns as guided henceforth.
- There will not be any withholding of tax by the government on domestic and cross border transactions.
- CT return to be filed once a year electronically, without any interim or advance returns.
Way forward for your Business
- Applicability of Corporate tax on your business activity.
- Check on your financial year and how you are going to accommodate corporate tax financial year with your existing one.
- Maintenance of books of accounts as per the internationally accepted accounting standards (IFRS).
- Develop Implementation strategy after in depth system review and identifying problem areas.
- Assess whether you are MNEs – pillar 2 as per OECD guidelines.
- GAP & Transfer Pricing Analysis, update Transfer Pricing policies.
- CT Registration and compliance.
What we Recommend?
- Consider hiring experts for checking compliance and review. To avoid costs and time, we recommend outsourcing the same.
- Check for adequate bookkeeping. Unless included in Tax Group for Corporate Tax purposes, each legal entity would be required to report taxable income separately.
How can we help?
Our team of qualified tax consultants and finance experts are happy to provide practical help and advice to ensure timely and cost-effective Tax services. We have experience into Corporate Tax, VAT and Excise which becomes favorable to your business to get things done at one-go.
Call: +971 50 841 3395