UAE Corporate Tax Public Consultation
From 28 April 2022 to 19 May 2022, the UAE Ministry of Finance (“MoF”) has set in motion a public consultation on the recently introduced Corporate Tax (“CT”) in the UAE. A document for finalization was released in advance for this purpose containing the policy background and key principles driving the proposed CT.
The aim is to collate and consider inputs from stakeholders to further refine and implement the proposed UAE CT regulations.
- Below is a brief overview of the International Tax and Transfer Pricing developments as per the public consultation document:
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International Tax |
Transfer Pricing |
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UAE CT will apply to UAE companies and other legal persons incorporated in the UAE as well as to a foreign legal entity having a Permanent Establishment (“PE”) in the UAE. |
As part of the introduction of Transfer Pricing (“TP”), the UAE will apply the internationally recognised “arm’s length” principle to transactions and arrangements between related parties and with connected persons. |
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Limited and general partnerships and other unincorporated joint ventures and associations of persons will be treated as “transparent” for UAE CT purposes. |
A related party is an individual or entity who has a pre-existing relationship with a business that is within the scope of the UAE CT regime through ownership, control or kinship. |
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Under the “reciprocity principle”, income earned by a non-resident from operating or leasing aircraft or ships used in international transportation will be exempt. |
Transfer Pricing Documentation requirement shall include:
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UAE resident companies will be subject to UAE CT on their worldwide income. The UAE CT regime will allow a “Foreign Tax Credit” to avoid double taxation. |
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UAE corporate shareholders will be exempt from CT on dividends received, and capital gains earned from the sale of shares of a subsidiary company. |
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- Key Takeaways
- Although the released document is not yet final and is subject to changes, it already provides an overview of the Corporate Tax Regulations that will be implemented in the UAE. Hence, businesses should start assessing their business structures and determine the potential impact of the CT rules to plan and ensure compliance.
- Businesses should also undertake an impact analysis to identify the relevance of such provisions for their operation and consider contributing to their polishing by participating and submitting comments as part of the public consultation. The preparation of a Local File for the UAE entity can also greatly increase future compliance with the upcoming TP regulations.
