All activities undertaken by the legal corporate will be deemed as ‘business activities’ hence any such income will attract CT.
However, dividends and capital gains earned by a UAE business from its qualifying shareholdings will be exempt from UAE CT. We need to wait for more clarification about Qualifying shareholdings.
Currently, except for large multinational companies, all other corporates will attract a unified slab rate of taxes – 0% to be applicable on taxable income up to AED 375,000 and 9% on the taxable income above AED 375,000, in financial year.
However certain sectors like extraction of natural resources – oil and gas etc., will continue to be subject to Emirates level corporate taxation.
To define different slab rates in the future is the UAE government peroragative.
There is no prescribed requirement to change the financial year to the tax financial year of June – May however many entities are likely to change their financial year to be better aligned to the tax fiscal year.
Free zone businesses will be subject to UAE CT, but the UAE CT regime will continue to honour the CT incentives currently being offered to free zone businesses that comply with all regulatory requirements and that do not conduct business with mainland UAE.
We need clarification from FTA as to whether even a small portion of the business with UAE mainland entity will disqualify the entity from the exemption or a pro rata will be considered.
Qualifying transactions between the entities with in the group shall be exempt provided they meet the prescribed criteria. Entities would have consider arms length transaction and transfer pricing as these are likely to among the prescribed criteria.
The taxable income will be the accounting net profit / income of a business, after making adjustments for certain items to be later specified under the UAE CT law. It is likely that certain expense like depreciation, amortization, allowances, etc. would have a defined threshold.
The UAE CT regime will allow a business to use losses incurred (as from the UAE CT effective date) to offset taxable income in subsequent financial periods. Excess tax losses may be carried forward and used against taxable income in future years, provided certain conditions are met. More clarifications and guidelines on carry forward criteria is awaited.
A UAE group of companies can elect to form a tax group and be treated as a single taxable person, provided certain conditions are met. A UAE tax group will only be required to file a single tax return for the entire group.
The CT return filing shall be on an annual basis. Filing deadlines and other conditions are yet to be defined by the UAE authorities.
Penalties and other compliance procedures are awaited to be clarified by the authority.
FinExpertiza UAE Enterprise House is the member of the International accounting network FinExpertiza Global in UAE, having presence in 17 countries and operating from two offices in Dubai and one from Sharjah.
We are a UAE-based Accounting Firm providing audit and corporate solutions to businesses in the UAE and other GCC countries; we operate through the legal name Enterprise House Corporate Services.