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VAT & TAX

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As per global best practice, the UAE is exploring other tax options as well. However, these are still being analysed and it is unlikely that they will be introduced in the near future. The UAE is not currently considering personal income taxes, however.

Our analysis suggests that it will help the country strengthen its economy by diversifying revenues away from oil and will allow us to fund many public services. This is a sign of a maturing economy.

The FTA website includes guides, public clarifications and other references that aim at assisting persons with a better understanding of UAE tax legislation.

A telephone hotline has been set up so that you can call and speak to one of our employees directly on 600599994.

The FTA provides information and education to businesses to help them with their tax implementation. The government will not pay for businesses to buy new technologies or hire tax specialists and accountants. That is the responsibility of each business.

Everyone is urged to fully comply with their VAT obligations.

Administrative penalties for violations have been issued by Cabinet Decision No. (40) of 2017 and can be found under the Legislation section on the FTA website.

Corporate Tax is a form of direct tax levied on the net income or profit of corporations and other businesses
Corporate Tax is sometimes also referred to as “Corporate Income Tax” or “Business Profits Tax” in other jurisdictions

A competitive CT regime based on international best practices will cement the UAE’s position as a leading global hub for business and investment, and accelerate the UAE’s development and transformation to achieve its strategic objectives
Introducing a CT regime reaffirms the UAE’s commitment to meeting international standards for tax transparency and preventing harmful tax practices

Most countries in the world have a comprehensive CT regime, including most of the GCC Member States

The UAE CT regime will become effective for financial years starting on or after 1 June 2023

Examples:

A business that has a financial year starting on 1 July 2023 and ending on 30 June 2024 will become subject to UAE CT from 1 July 2023 (which is the beginning of the first financial year that starts on or after 1 June 2023)
A business that has a (calendar year) financial year starting on 1 January 2023 and ending on 31 December 2023 will become subject to UAE CT from 1 January 2024 (which is the beginning of the first financial year that starts on or after 1 June 2023)

The UAE CT is a Federal tax and will therefore apply across all Emirates

The Federal Tax Authority will be responsible for the administration, collection, and enforcement of UAE CT

The Ministry of Finance will remain the ‘competent authority’ for purposes of bilateral/multilateral agreements and the international exchange of information for tax purposes

UAE CT will apply to all UAE businesses and commercial activities alike, except for the extraction of natural resources, which will remain subject to Emirate level corporate taxation

Foreign entities and individuals will be subject to UAE CT only if they conduct a trade or business in the UAE in an ongoing or regular manner

All activities undertaken by a legal entity will be deemed “business activities” and hence be within the scope of UAE CT

How do you determine whether an individual has a “business” that will be within the scope of UAE CT?

The taxable income will be the accounting net profit / income of a business, after making adjustments for certain items to be specified under the UAE CT law

The accounting net profit / income of a business is the amount reported in the financial statements prepared in accordance with internationally acceptable accounting standards

The CT rates are:

0% for taxable income up to AED 375,000;
9% for taxable income above AED 375,000; and
a different tax rate for large multinationals that meet specific criteria set with reference to ‘Pillar Two’ of the OECD Base Erosion and Profit Shifting project

A multinational corporation is a corporation that operates in its home country, as well as in other countries through a foreign subsidiary, branch or other form of presence / registration. Merely earning income from outside its home country without a foreign presence or registration would not make a business a multinational corporation

In the context of the global minimum effective tax rate as proposed under ‘Pillar Two’ of the OECD Base Erosion and Profit Shifting project,” large” refers to a multinational corporation that has consolidated global revenues in excess of EUR 750m (c. AED 3.15 bn)

UAE CT will not apply on an individual’s salary and other employment income (whether received from the public or private sector)

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