Tax Consultancy

The United Arab Emirates (“UAE”) decided on October 8, 2021, to apply the OECD’s Two-Pillar strategy. UAE agreed to implement the OECD’s Two-Pillar approach to reform it’s to reforming its International Tax Framework, as well as a minimum corporate tax rate beginning in 2023.

The Ministry of Finance announced on January 31, 2022, the implementation of a Corporate Tax system on corporate profits for financial years beginning on or after 1 June 2023.

Corporate tax (CT) is a type of direct tax levied on a corporation’s or other business’s net income or profit. Businesses operating in the UAE will be obliged to examine the impact of the new restrictions on their operations and comply with them. 

Our team of specialists at MARS can assist, you with suitable preparation in accordance with local tax requirements.

Corporate Tax Rates are indicated in the below table:

SR.NO. Taxable Income Corporate Tax (%)
1. Taxable income up to AED 375,000 0%
2. Taxable income over and above AED 375,000 9%
3. Large multinationals (having consolidated global revenue exceeding EURO 750 million – equivalent to AED 3.15 billion) Different tax rate
  • Free Zone businesses in UAE will be subject to Corporate Tax. However, it has been clarified that the Corporate Tax regime will continue to honour the corporate tax incentives currently being offered to free zone businesses that comply with all regulatory requirements and that do not conduct business in mainland UAE.
  • Businesses established in a free zone will be required to register and file a Corporate Tax Return.
  • Foreign entities and foreign individuals will be subject to Corporate Tax only if they conduct a trade or business in the UAE in an ongoing or regular manner.
  • Moreover, Corporate Tax in UAE will generally not be levied on a foreign investor’s income derived from dividends, capital gains, interest, royalties, and other investment returns.

Applicability of Transfer Pricing Rules:

Transfer Pricing rules and documentation requirements will now be aligned with the OECD Transfer Pricing Guidelines i.e., Master File and Local File. Documentation will require groups of companies to perform benchmarking searches to justify their pricing policies of inter-company transactions. Further details on this are awaited.

Implications

Businesses should assess the potential impact of Corporate Tax on their operations and prepare for CT compliance requirements in the UAE. Specifically, businesses should:

  • Assess whether the existing tax function, operating model and governance (people, processes, systems and technology) are sufficient to address the requirements of the CT regime.
  • Assess the impact of Corporate Tax on existing legal structures and operating models. This could include a quantitative analysis showing the anticipated financial impact of CT.
  • Identify potential exposures and opportunities to drive tax efficiencies from both a tax cost and administrative perspective prior to the Corporate Tax implementation, e.g., legal entity rationalisation, international and domestic restructuring, and transfer pricing.

Also, businesses should assess whether accounting policies and data management systems are appropriate to achieve a position of full compliance with both Corporate Tax and existing Value Added Tax reporting obligations.

At MARS, our team of experts can help you in assessing the challenges and opportunities that the introduction of a Corporate Tax will bring.

Advisory services:

  • Impact assessment of Corporate Tax on business.
  • Advise on whether any exemption can be availed after getting more clarity from FTA
  • Advise on Group Corporate Tax and how to minimize potential risks
  • Advise on potential Corporate Tax risk areas and challenges faced by taxpayer
  • Assist in restructuring the business/operational model from the Corporate Tax perspective
  • Advise on availing Foreign Tax Credit paid by taxpayer in other countries
  • Advice on withholding taxes.

Compliance Services:

  • Assist in registration for Corporate Tax before the relevant authorities
  • Computation of taxable income and corresponding Corporate Tax in UAE.
  • Preparation and filing of tax return.

Representation services:

  • Preparing the written submissions to be furnished before tax authorities
  • Assisting in filing the response against the notices received from tax authorities
  • Filing of written appeal against the adverse tax adjustments made or penalty imposed by the tax authorities
  • Representing the taxpayer before tax authorities and arguing on behalf of the taxpayer.

Contact us
Mr Abdulkader Bhanpurawala
Managing Partner
M: 056-4133479
E: ak.bhanpurawala@marsgroup.ae