UAE to introduce 9% corporate tax on business profits from June 1, 2023

corporate-tax

Ministry of Finance to introduce federal corporate tax on business profits, effective for financial years starting on or after 1 June 2023

ABU DHABI, 31st January, 2022 (WAM) — The Ministry of Finance has announced that the UAE will introduce a federal corporate tax on business profits that will be effective for financial years starting on or after 1st June 2023. Businesses will become subject to UAE corporate tax from the beginning of their first financial year that starts on or after 1st June 2023.

The UAE corporate tax regime has been designed to incorporate best practices globally and minimise the compliance burden on businesses. Corporate tax will be payable on the profits of UAE businesses as reported in their financial statements prepared in accordance with internationally acceptable accounting standards, with minimal exceptions and adjustments. The corporate tax will apply to all businesses and commercial activities alike, except for the extraction of natural resources which will remain subject to Emirate level corporate taxation.

With a standard statutory tax rate of 9 percent and a 0 percent tax rate for taxable profits up to AED375,000 to support small businesses and startups, the UAE corporate tax regime will be amongst the most competitive in the world.

No corporate tax will apply on personal income from employment, real estate and other investments, or on any other income earned by individuals that does not arise from a business or other form of commercial activity licensed or otherwise permitted to be undertaken in the UAE.

“As a leading jurisdiction for innovation and investment, the UAE plays a pivotal role in helping businesses grow, locally and globally. The certainty of a competitive and best in class corporate tax regime, together with the UAE’s extensive double tax treaty network, will cement the UAE’s position as a world-leading hub for business and investment”, said Younis Haji Al Khoori, Undersecretary of the Ministry of Finance.

Younis Haji Al Khoori further adds that “with the introduction of corporate tax, the UAE reaffirms its commitment to meeting international standards for tax transparency and preventing harmful tax practices. The regime will pave the way for the UAE to address the challenges arising from the digitalisation of the global economy and the other remaining BEPS [Base Erosion and Profit Shifting] concerns, and execute its support for the introduction of a global minimum tax rate by applying a different corporate tax rate to large multinationals that meet specific criteria set with reference to the above initiative.”

Recognising the contribution of free zones to the UAE’s economy and competitiveness, the UAE 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 with mainland UAE.

Given the position of the UAE as a global financial centre and an international business hub, the UAE will not impose withholding taxes on domestic and cross border payments, or subject foreign investors who do not carry on business in the UAE to corporate tax.

As an international headquarter location, a UAE business will be exempt from paying tax on capital gains and dividends received from its qualifying shareholdings, and foreign taxes will be allowed to be credited against UAE corporate tax payable.

The UAE corporate tax regime will have generous loss utilisation rules and will allow UAE groups to be taxed as a single entity or to apply group relief in respect of losses and intragroup transactions and restructurings.

The UAE corporate tax regime will ensure the compliance burden is kept to a minimum for businesses that prepare and maintain adequate financial statements. Businesses will only need to file one corporate tax return each financial year and will not be required to make advance tax payments or prepare provisional tax returns. Transfer pricing and documentation requirements will apply to UAE businesses with reference to the OECD Transfer Pricing Guidelines.

“The introduction of a corporate tax regime will help the UAE achieve its strategic ambitions and incentivise businesses to establish and expand their activities in the UAE,” said Younis Haji Al Khoori.

UAE businesses will be given ample time to prepare for the introduction of corporate tax in the UAE. The UAE Ministry of Finance plans to issue further information on the UAE corporate tax regime toward the middle of the year to help businesses get ready and be fully compliant.

*For further information, please visit the Federal Tax Authority website: https://tax.gov.ae/en

Courtesy:-  https://wam.ae/en

Redetermination of penalties equal to 30% of the total unpaid penalties, pursuant to Cabinet Decision 49 of 2021 on the Administrative Penalties for Violation of Tax Laws in the UAE:

Tax Reduction in the Penalties

 

Redetermination of penalties equal to 30% of the total unpaid penalties

31 December 2021 is the due date to avail the benefit of the Tax Penalties Amnesty or Redetermination of penalties pursuant to Cabinet Decision 49 of 2021 (the Redetermination of penalties equal to 30% of the total unpaid penalties).

To benefit from the tax penalties amnesty or redetermination, all of the following conditions have to be met according to Article 3 of Cabinet Decision 49 of 2021 on the Administrative Penalties for Violation of Tax Laws in the UAE:

  1. Any of the administrative penalties set out in Cabinet Decision No. 40 of 2017 have been imposed on the person before the effective date of Cabinet Decision No. 49 of 2021 (i.e. before 28 June 2021);
  2. The person has not settled all the administrative penalties imposed on it as per Cabinet Decision No. 40 of 2017 in full before 28 June 2021
  3. The taxable person has undertaken all of the following:
  • Settled all payable tax, i.e. the registrant shall ensure that by 31 December 2021, no payable tax is still outstanding whether such tax was payable before or after 28 June 2021, and that all such amounts have been received by the FTA by 31 December 2021; and
  • Settled 30% of the total unsettled administrative penalties referenced above which were imposed before 28 June 2021, no later than 31 December 2021.
  • In order to avail the tax amnesty benefit, ensure that all of the above mentioned conditions are fulfilled.
  • All payable taxes is the tax payable (based on tax returns submitted and any adjustments due to voluntary disclosures or tax assessments) that is still outstanding whether such tax was payable before or after 28 June 2021.
  • 30% of the total unsettled administrative penalties refer to the administrative penalties imposed prior to 28 June 2021 pursuant to Cabinet Decision No. 40 of 2017.
  • All the payable taxes and 30% of the administrative penalties must be settled by 31 December 2021.
  • The amount to be settled as per Cabinet Decision No. (49) of 2021 may be viewed by logging into your E-services account and by clicking the option: “Click Here” to view the Amendment of Administrative Penalties imposed as per Cabinet Decision No. 49 of 2021.
  • Please ensure that the payment transfer(s) reflect on the FTA portal by 31 December 2021 and the payment receipts are available to substantiate the transfer.

UAE AMENDED SOME ADMINISTRATIVE PENALTIES FOR VIOLATION OF TAX LAWS IN THE UAE

UAE Tax penalty
Cabinet Decision No. 49 of 2021 on Amending some Provisions of Cabinet Decision No. 40 of 2017 on the Administrative Penalties for Violation of Tax Laws in the UAE
In accordance with Cabinet Decision No 49 of 2021 on Amending some Provisions of Cabinet Decision No. 40 of 2017 on the Administrative Penalties for Violation of Tax Laws in the UAE, which will be effective from 28 June 2021, the FTA would like to inform you that it has released two Public Clarifications, which you can view on the FTA website.
With respect to TAXP002, and if you had any outstanding balances, you would have previously been able to see such outstanding balance on the returns page. From Wednesday 23 June, you will be able to see how much of your balance is related to tax and how much is related to administrative penalties on the My Payments page when you log into E-Services. This link will open a window that will include the following:
  • Tax Payable – this is the outstanding tax balance (based on tax returns you submitted and any adjustments due to voluntary disclosures or tax assessments) and will be updated on a daily basis until 31 December 2021, for you to know how much tax is outstanding and is subject to late payment penalties if not settled by payable date, and needs to be settled in full before 31 December 2021 to benefit from the redetermination of administrative penalties in accordance with Cabinet Decision No 49 of 2021.
  • Late Registration Penalty – this is the outstanding unpaid late registration penalty, if available.
  • Other Penalties Payable – this is the outstanding unpaid administrative penalties balance (other than late registration) and may increase if new administrative penalties are applied or decrease if payments are made or penalty reversed. The balance on 28 June 2021 will be subject to redetermination if conditions stated in Cabinet Decision No 49 of 2021 are met.
  • Net Payable Amount – this is the total amount of Tax Payable and Penalties Payable outstanding at any time.
  • Total Credit – this is the amount of credit that the registrant has with the FTA. FTA will be launching a full dashboard with your Tax Payable and Administrative Penalties

RECEIVED PENALTIES FOR NON-SUBMISSION OF ESR REPORT?!. FILE AN APPEAL

ESR-Notification-UAE
Received Penalties For No-Submission Of ESR Report?!. File An Appeal
Did you successfully submit the Economic Substance Notification & Economic Substance Report of your company to the Ministry of Finance?
Did you successfully submit the Economic Substance Notification & Economic Substance Report of your company to the Ministry of Finance?
Did you get any response from the authority is after that?
Many licensees in the UAE have come across penalty emails from the Ministry of Finance.

Did you get any such penalty email?

If yes, do you know how to resolve the issues? In order to resolve such issues, we should know exactly the reason for receiving such a penalty ticket from the Authority. We have listed down some of the reasons why you might have received penalty emails
Situation in which Economic Substance Notification is submitted declaring a Specific Relevant Activity. Later the Economic Substance notification amendment was filed that it is not covered in Relevant activity neither earning relevant income in the Economic Substance Notification.
In this case, the company need not submit the Economic Substance Report. But the approval for Amendment on Economic Substance Notification might have taken the time and by then the Economic Substance Report Tab becomes active.
Economic Substance Report was not filed since it is not carrying relevant activity . Still, the penalty ticket may raise.
How to waive off the penalties generated from situations like above?
In the above-given scenarios, the Licensee or Exempted Licensee will have the option to Appeal.
Article 13 & 14 of the Economic Substance Regulation provides the offences & penalties for failure to provide Notification and Report, respectively. The administrative penalty will be levied on that Licensee or Exempted Licensee who fails to submit Notification & Report (wherever applicable) as below: Failure to submit Penalty Amount
Failure to submit
Penalty amount
ECONOMIC SUBSTANCE REGULATION [ESR] Notification
AED 20,000
ECONOMIC SUBSTANCE REGULATION [ESR] Report
AED 50,000
If there is a delay in submitting Economic Substance Notification or Economic Substance Reports, and if such delay is because of the ignorance of the Law, the chance of getting approval for waiving off the penalty cannot be assured through an appeal.
But there are genuine cases as mentioned at the beginning of this article, where the penalty can be appealed and removed. We are happy to resolve your issues by submitting the Appeal to the Authority.

UAE- NEW LAW ALLOWING FULL FOREIGN OWNERSHIP OF ONSHORE COMPANIES TAKES EFFECT ON JUNE 1

Dept. of economic development
The UAE’s Ministry of Economy has confirmed that the amended legislation permitting foreign investors and entrepreneurs to establish and fully own onshore companies, will come into effect from June 1.
Amendment to the Commercial Companies Law will ‘boost country’s competitive edge and facilitate business’, according to UAE Minister of Economy
Minister of Economy Abdullah bin Touq in a tweet confirmed that the latest decision is a new step that reflects the UAE government’s commitment to supporting the economy and enhancing its readiness for the future.
In November 2020, the UAE announced that the of businesses would take effect from December 1, 2020. However, after widening the scope of sectors eligible for full ownership by foreign investors, the law is now ready for roll out from June 1, 2021.
The long-anticipated and widely discussed reform, which will have game-changing implications on the investment landscape of the nation, was approved by President His Highness Sheikh Khalifa bin Zayed Al Nahyan last year.
His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, has said the UAE now enjoys a fertile legislative environment for foreign direct investors in order to enhance the nation’s competitiveness.
Last month, the UAE’s Ministry of Economy also said it was working on a new legislation to include 10 new sectors to the Commercial Companies Law, which allows 100 per cent foreign ownership of onshore companies in the country.

TEMPORARY ZERO-RATING OF CERTAIN MEDICAL EQUIPMENT

On 1 September 2020, the Cabinet issued a Cabinet Decision No. 9/12 O of 2020 (“Cabinet Decision”). The Decision concerns the temporary application of VAT at the 0% rate on certain supplies and imports of medical equipment. Furthermore, the Ministerial Decision No. 380 of 2020 (“Ministerial Decision”) issued by the Minister of Health and Prevention on 6 December 2020 (with effect from 1 September 2020) specifies the medical equipment that are zero-rated in accordance with the Cabinet Decision. In accordance with Cabinet Decision No. 15/3 O of 2021, the above decisions shall be effective until 31 December 2021.
In accordance with the Cabinet Decision, a supply or import of certain medical equipment may be zero-rated. It should be noted that that the zero-rating of supplies and imports under the Cabinet Decision is separate, and in addition to, zero-rating of any other medical equipment in accordance with Cabinet Decision No. 56 of 2017 on Medications and Medical Equipment Subject to Tax at Zero Rate.
On 1 September 2020, the Cabinet issued a Cabinet Decision No. 9/12 O of 2020 (“Cabinet Decision”). The Decision concerns the temporary application of VAT at the 0% rate on certain supplies and imports of medical equipment. Furthermore, the Ministerial Decision No. 380 of 2020 (“Ministerial Decision”) issued by the Minister of Health and Prevention on 6 December 2020 (with effect from 1 September 2020) specifies the medical equipment that are zero-rated in accordance with the Cabinet Decision. In accordance with Cabinet Decision No. 15/3 O of 2021, the above decisions shall be effective until 31 December 2021.
In accordance with the Cabinet Decision, a supply or import of certain medical equipment may be zero-rated. It should be noted that that the zero-rating of supplies and imports under the Cabinet Decision is separate, and in addition to, zero-rating of any other medical equipment in accordance with Cabinet Decision No. 56 of 2017 on Medications and Medical Equipment Subject to Tax at Zero Rate.
The “medical equipment” to which the temporary zero-rating rules apply are personal protective equipment used for the protection from Covid-19, and which contain the features and meet the specifications determined and specified by the Ministerial Decision. Such medical equipment are limited to:
  • Medical face masks that are not included in the Cabinet Decision No. 56 of 2017 on Medications and Medical Equipment Subject to Tax at Zero Rate (of approved standards 14683 and UAE.S ASTM F2100);
  • Half filtered face mask (UAE.S EN 149);
  • Chemical disinfectants and antiseptics intended for use on the human body, but excluding detergents, cosmetics and personal care products (UAE.S EN 1276, EN 1650, and EN 14476:2013+A2).
  • Non-Medical “community” face mask made from textile (UAE.S 1956);
  • Chemical disinfectants and antiseptics intended for use on the human body, but excluding detergents, cosmetics and personal care products (UAE.S EN 1276, EN 1650, and EN 14476:2013+A2).

CONDITIONS TO ZERO-RATING

Date of supply/import of above mentioned medical equipment shall be within the period beginning from 1 September 2020 to 31 December 2021.

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