The UAE’s 9% corporate tax rate positions the country as a highly competitive tax regime, globally and regionally
The UAE is currently aligning with international policies and guidelines and changing policies, which will help keep its economy in a profitable range in the future. — File photo
The UAE’s latest decision to diversify its sources of revenue will have a positive impact on the economy in general and the real estate sector in particular, in addition to aligning the country’s business sector with international best practices in tax transparency, according to experts and senior executives.
Shabana Begum, partner and head of transfer pricing at KPMG Lower Gulf, said the announcement of corporate tax by the Ministry of Finance will undoubtedly lead to positive changes to the business landscape that will align the UAE with international standards of tax transparency and will aim to prevent harmful tax practices.
“The announced 9% corporate tax (CT) rate is highly competitive both within the GCC and globally and will solidify the UAE’s position as a global hub for business and finance. investment, accelerating the country’s development and transformation,” Shabana said.
“The new corporate tax regime will come into effect for financial years beginning on or after June 1, 2023, which for calendar year-end businesses means the first reporting period will begin January 1, 2024. This is considered a generous period of preparation. time and reflects the UAE’s commitment to maintaining a business-friendly environment,” she added.
SMEs welcome tax benefits
Stuart Cioccarelli, partner and head of tax at KPMG Lower Gulf, said SMEs, the engine of the UAE’s economy, would welcome the additional benefits, as companies with taxable income of up to Dh375,000 will not do not have to pay tax. Likewise, he said the zero percent free zone incentives will continue for companies established in the UAE free zone.
“While companies in the free zone will continue to be exempt provided they do not carry on business on the mainland, they must however file tax returns. Individuals who carry out activities such as investment real estate in their own name will not be subject to corporation tax,” Cioccarelli said.
He said private sector companies might actually welcome the reduction in fees and charges, given that it is better to pay a corporate income tax than to pay fees and charges to a loss-making company.
“With the new tax regime, businesses in the UAE will operate in accordance with its international tax transparency and governance agenda, resulting in stability and ease of doing business. It will also help businesses attract global talent and expand into new sectors,” he added.
The United Arab Emirates remains a business center
Rizwan Sajan, Chairman and Founder of Danube Group, said the UAE is currently aligning with international policies and guidelines and changing policies, which will help keep its economy in a profitable range in the future.
“The 9% corporate tax that will be levied on companies from June 2023 will be levied on companies that show profits above 350,000 Dh, no individual, real estate, investment or employee will have to bear the weight of this new slab. This tax was introduced a few weeks after the UAE government changed the working week and aligns itself to position the UAE as a global economic center in terms of business and investment,” said Sajan. Khaleej times Wednesday.
He said the UAE’s corporate tax regime will ensure that the compliance burden is minimized for companies that prepare and maintain adequate financial statements. “Companies will only have to file one corporation tax return per fiscal year and will not be required to make advance tax payments or prepare interim tax returns,” he said. said, adding that transfer pricing and documentation requirements will apply to UAE companies with reference to the OECD Transfer Pricing Guidelines.
“This new structure will initially be a drag on business, but I believe that once we look at the bigger picture, this tax will help control funds for the UAE’s economic and overall development plans,” said Sajan.
Main features of the new corporate tax
– The applicability of the CIT is from June 1, 2023. However, the impact of OECD BEPS 2.0 Pillar 2 will be from January 1, 2023, according to the current planned deadlines. First UAE and Pillar 2 corporate tax returns could be due in 2025
– For large multinational enterprise groups (MNEs), the tax rate is likely to be 15% based on pillar 2 of OECD BEPS 2.0.
– There are no withholding or withholding tax provisions
– There is no tax on capital gains or on dividends from qualifying holdings
– OECD transfer pricing rules will apply under the UAE corporate tax regime
– There will be tax grouping provisions and group relief, so UAE groups may be able to file a single consolidated tax return
– The detailed corporate tax law will be published around mid-2022