Impact of the Corporate Tax on MNEs

Taxation significantly influences the determination of the location of Multinational Enterprises (“MNEs”). With the introduction of a Corporate Tax (“CT”) regime starting 01 June 2023, MNEs will be substantially impacted.

Key impact of UAE CT

1.    Subject to the UAE CT, payment and compliances will be due if an entity is- Effectively controlled or managed in the UAE / operated through a permanent establishment in the UAE / earning UAE sourced income.

2.    Transactions with related parties in the UAE will be regulated under the UAE Transfer Pricing (“TP”) provisions.

3.    Dividend and gain on sale of shares will be tax exempt.

Pillar 2 Global minimum tax and UAE CT

1.    Consolidated global revenue exceeding EUR 750 million will be subject to 15% tax rate.

2.    Effective tax rate of less than 15% will be liable for a top up tax.

3.    UAE may adopt the Pillar 2 rules and specify a different tax rate.

Key Challenges?

•        Determination of PoEM, PE in the UAE, and Nexus.

•        Litigation in the UAE due to limited guidance and divergent views.

•        Potential double tax issues and benefits under the tax treaties in country of residence and/or UAE.

•        Attribution of profits to the PE in the UAE.

•        Additional compliance costs and administrative burden for businesses.

•        Rigorous scrutiny by the competent tax authority to mitigate tax evasion.

How can Crowe help?

•        In depth analysis of the existing or proposed business structures, transactions, arrangements and  operations in the UAE to evaluate the UAE CT exposure.

•        Evaluating the risk of PE in the UAE and identifying the impact of the potential PE on business.

•        Advising on business restructuring to optimize the tax costs and in documentation to support the tax positions.

•        Assisting and advising on the tax compliances.