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2023: A checklist for the year ahead

The global economy, regulatory laws and technological developments will pose interesting challenges

By Pankaj S. Jain

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2023 will be an instrumental year for UAE businesses on multiple fronts. The global economy, regulatory laws and technological developments will pose interesting challenges to all businesses, whether small or big. The growing scope of taxation and compliance in the UAE will stand out as another important aspect for businesses.

We have had ‘Tax Conversations’ on important tax developments throughout 2022. In 2023, we will continue to focus on explaining the laws in easy-to-understand manner, addressing business challenges and discuss policy developments with insights from international jurisprudence. ‘Tax Conversations’ will also evolve as the year progresses.

As we start the new year, here is a quick checklist for you to prepare for the year ahead:

1.Corporate Tax:

Corporate tax will be implemented on your company’s financial year starting on or after 01 June 2023. There is no obligation to change your existing financial year cycle or prepare separate yearly accounts for June-May.

Corporate tax could also be applicable on individuals engaged in business activities (details to issued soon)

The first corporate tax return, and tax payment, will be required only at the end of 9 months from the end of the relevant financial year.

Businesses will have sufficient time to prepare for corporate tax. We have emphasised it at multiple occasions & seminars. The Ministry of Finance has also stated this fact in its recent announcements.

The tax regime is expected to introduce a ‘small business’ relief scheme in addition to the 0% tax slab for income up to AED 375,000

‘Anti-abuse provisions’, a global phenomenon, are important for planning the corporate tax implementation and for structing business models.

2.Transfer Pricing

Ensure domestic transfer pricing compliance i.e. benchmarking transactions with company’s owners/directors, their relatives and other connected persons at arm’s length.

Ensure Country-by-country reporting (CdCR) compliance as applicable on MNCs operating in the UAE

Unjustified losses in the UAE entity of MNCs could henceforth be challenged by the tax authorities

3.Free Zone

Be ready to revisit your business operations/models for corporate tax exemption (to be announced soon)

Maintain economic substance in the UAE to claim tax exemption

4.VAT

Ensure that your existing tax positions are consistent with vat laws/guidance. VAT audits are expected to increase in 2023

Ensure that your team and documentation is ready to face any tax audit/assessment

You would be required to submit voluntary disclosures, with likely penalties, even for errors which do not have any additional tax impact

Align your business/finance processes with the recent changes in the VAT laws

Review your eligibility for exception from existing VAT registration

Ensure compliance with non-tax payment obligations as well

Read previous ‘Tax Conversations’ of 2022

5. Custom

Custom inquiries/audits are expected to increase. Review your custom duty compliance and obligations

Take benefits of ‘self-audit’ processes introduced by custom authorities

6. Accounting

Focus on developing a robust accounting processes and discipline

Ensure effective document retention policy and procedures

7. Tax Strategy for 2023

Review the benefit of 4Rs principles for effective tax policy (discussed in earlier ‘Tax conversations’)

Plan for learning & development of your finance teams

Introspect if taxation is a distinct field of specialisation and ask the relevant questions

Taxation is as much fun as it is important for businesses continuity. With a promise to keep engaging in interesting conversations, we leave you today with the above checklist and the best wishes for a happy new year.

(Pankaj S. Jain is the managing director of AskPankaj Tax Advisors. For feedback and queries, you may write to info@AskPankaj.com. Views expressed are his own and do not reflect the newspaper’s policy.)