As a historic development, on 31 January 2022, the Ministry of Finance (‘MoF’) of United Arab Emirates (‘UAE’) issued an initial guidance rolling out the implementation of corporate taxation (‘CT’) regime effective from 1 June 2023. There is lot of work going on in the international taxation space like implementation of Two Pillar Solution addressing the tax challenges arising from the digitalisation of the economy, effectuating the Multilateral Instruments (‘MLI’), policy making in exchange of information etc. Global consensus on Minimum Taxation at the rate of 15% through Pillar Two of Action Plan 1 of Base Erosion Profit Shifting (‘BEPS’) leading ‘low/ no tax’ or so called ‘tax heavens’ to revisit their taxation regime.

The initial guidance/ FAQs issued provides the highlights of the UAE CT regime and detailed legislation on applicability, implementation, administration etc. will be released later. Under CT regime all UAE businesses are under scope of corporate tax except those in the extraction of natural resources i.e., oil and gas. The notified corporate tax rate is as under:

 

Taxable Income

Tax Rate

up to AED 375,000
  1.  

above AED 375,000
  1.  

A different tax rate (to be notified later) for large multinational corporations having consolidated global revenues in excess of EUR 750m as provided under Pillar Two.

 

The initial guidance has been issued with sufficient time to roll out full fledge legislation prior to regime coming into effect i.e. 1 June 2023, however, from taxpayers perspective it is advisable to evaluate the impact on existing and proposed business in UAE.

 

In the attached newsflash we have provided the salient features of UAE CT regime and hope you find the same useful.

 

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