‘Tax Talk’ clears issues on UAE corporate tax

Session in Dubai organised by ICAI


A Staff Reporter

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Published: Thu 18 May 2023, 2:47 PM

Last updated: Thu 18 May 2023, 5:31 PM

ICAI Dubai Chapter conducted an engrossing session on UAE corporate tax titled, Tax Talk with a full house audience of chartered accountants on May 14 at the Emirates International School Theatre, Dubai. The event was attended by more than 500 attendees.

With the many recently published ministerial and FTA decisions, many corporates and business houses look up to the experts in the profession to interpret and guide in their tax matters. The secretary of the chapter, Jai Prakash Agarwal, provided an understanding on the difference between cabinet and ministerial decisions. “While UAE has kept rate of corporate tax on lower side as compared to other countries across the globe; we as residents and citizens also have a responsibility to adapt fair tax practices and pay due taxes on business profits without adapting any measures that tantamount to tax evasion. By paying due taxes, we will enable the government and the authority to keep the rate of taxes on lower side in longer run, which will be beneficial for all of us,” he added.

Chirag Gupta, partner with RNG Auditors said: “The UAE government has published a number of cabinet and ministerial decisions related to the UAE corporate taxlaw. The latest is the explanatory guide by the Ministry of Finance, which further simplifies the corporate tax law. These decisions aim to alleviate the tax burden on businesses, specially small and medium-sized enterprises (SMEs), foster their growth, and contribute to the overall economic resilience of the nation.”

A book on UAE corporate tax was released at the event. This was the result of a joint effort of the Dubai Chapter along with another UAE chapter and ICAI India. This material is intended to add on to professional knowledge of its members and those who can benefit from it,” said Harikishan Rankawat, chairman of the ICAI Dubai Chapter.

Another critical aspect of corporate tax is transfer pricing. Atul Kumar Gupta, board member IFAC and XBRL International, chairman GST committee at FII and ex-president of ICAI, shared some practical insights into the concepts of arm’s length pricing between related parties and connected persons. The speaker emphasised on the need for thought of tax impact on various aspects of business such as costing, supply chain management, IT infrastructure, finance function and compliances. He further added that such framework was essential to ensure reasonable, fair and equitable profits and taxes and to protect the right of a country to collect its fair share of taxes preventing MNEs from shifting profits to low tax jurisdictions by manipulative practices. The speaker briefed on the various TP methods with some practical case studies.

Further adding to the topic on TP, Sheetal Sapra, senior manager with UHY James, took a more pragmatic approach on the topic of UAE taxes and its implementation. She said that UAE’s decision to adopt a more competitive rate of tax compared to the rest of the GCC was in line with the intention to remain a global business and investment hub, without introducing the payroll tax till date. Sheetal also stated that more clarity is expected in TP documentation requirements in terms of possible threshold for disclosure forms and most importantly, qualifying free zone persons.

While a lot has been said about MNEs, Samir Popat, partner & director- taxation at Nadeem and Umendra Chartered Accountants said: “The Dh3 million revenue threshold limit established by Ministerial Decision no. 73 of 2023 has garnered appreciation for its beneficial impact on SMEs. Despite opting for small business relief, SMEs must adhere to mandatory requirements such as registering for corporate tax and filing tax returns. It is crucial for SMEs to approach the option of small business relief with caution. Factors to be carefully considered include the occurrence of losses during the specific tax period and the presence of interest expenditure to be carried forward, among others. By carefully examining these factors, SMEs can make informed decisions regarding their eligibility for small business relief and take advantage of its benefits.”

The Federal Decree-Law No. (47) of 2022 on the taxation of corporations and businesses was issued on December 9, 2022. The UAE corporate tax will be effective from financial years on or after June 1, 2023. Corporate tax is a direct tax levied on the net income of corporations and other businesses. Corporate tax will be levied at a rate of 9 per cent on taxable income exceeding Dh375,000.00. Any taxable incomes below this threshold will be subjected to zero per cent corporate tax rate.

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