Corporate Tax And VAT Consultancy

CORPORATE TAX

The UAE Ministry of Finance introduced a corporate tax on business profits in financial years starting on or after June 1, 2023. The Ministry also confirmed that there will be no tax on profits of up to AED 375,000, a move that will help small businesses. No corporate tax will apply to personal income from employment, real estate, and other investments, or any other income earned by individuals that do not arise from business or other forms of commercial activity, licensed or otherwise.

Highlights of UAE Corporate Tax:
1. Corporate tax will be applicable for financial years starting on or after June 1, 2023.
2. Corporate tax rates are expected to be as follows:

0% for taxable income not exceeding AED 375,000
9% for taxable income exceeding AED 375,000

A different tax rate for large multinationals (with consolidated turnover exceeding AED 3.15 billion) that meet specific criteria set with reference to the Global Anti-Base Erosion Model Rules (Pillar Two) of the OECD Erosion and Profit Shifting project
The corporate tax regime will honor the tax incentives currently being offered to free zones. A clarification as to whether the passive income and sale of goods exclusions also apply to intergroup transactions is required.
Corporate tax will not be levied on a foreign investor’s income from dividends, capital gains, interest, royalties, and other investment returns.
The consultation document proposes the introduction of a transfer pricing regime in line with the internationally recognized “arm’s length” principle. The proposed transfer pricing regulations would be applicable for transactions between related parties and connected persons. Taxpayers to whom the transfer pricing provisions apply would be required to submit a disclosure containing information regarding their transactions with related parties and connected persons. Also, taxpayers would be required to prepare and maintain a master file and a local file if the transactions met the prescribed thresholds.
Presently, a 0% withholding tax is proposed to apply to all types of domestic and cross-border payments. UAE businesses will not need to deduct taxes while making payments. Further, there will be no obligation to file withholding tax returns.

Three key challenges foreseen include:

Preparation of Financial Statements and Tax Accounts
Planning for resource requirements and the availability of qualified and experienced tax accountants
Implementation includes gap analysis, systems review, internal education, training, and documentation.

To overcome the challenges, UAE businesses must recognize their internal strengths and seek proper expert advice and assistance from external tax specialists. They must start early and prepare themselves to ensure readiness ahead of time.

HOW CAN WE HELP?

Phase 1 – Impact Assessment

1. Evaluate the present financial accounting, reporting, internal control, systems, and documentation processes.
2. Examine the current company model, organizational structure, revenue streams, costs, and assets.
3. Perform a gap analysis to find any flaws and offer suggestions for how to improve the procedures so that they are in line with corporate tax standards.
4. Examine the effects of cross-border transactions and transfer pricing to determine any potential tax repercussions.
5. Determine the level of tax expertise that the companies’ resource planning needs should include.

Phase 2 – Implementation and Transition Support

1. Develop policies and procedures to ensure compliance with corporate tax regulations.
2. Design an implementation plan to include training, establishing systems, reporting, and process changes.
3. Revise accounting policies to reflect cut-off procedures with respect to revenue, cost, losses, and depreciation.
4. Recommend changes to documentation and reporting, including invoices, purchase orders, and delivery notes.
5. Ensure a smooth transition and compliance with other applicable UAE laws, including Economic Substance Regulation, Country-by-Country Reporting, Ultimate Beneficial Owner Declaration, Anti-Money Laundering, and Value Added Tax.

Phase 3 – Annual Corporate Tax Filing (Post Implementation Support)

1. Tax registration for companies, forming tax groups, where applicable, and obtaining a Tax Registration Number
2. Prepare tax accounts and calculate the taxable income and tax payable.
3. Scrutinize and validate deductible expenses and prepare and submit tax returns before the due date.
4. Conduct a transfer pricing assessment and analyse the transactions.

Coordinate with the UAE Federal Tax Authority to seek clarifications and respond to queries and notices on tax filing.

VAT

As the market becomes more competitive, each company faces unique challenges. AKW Consultants, an experienced VAT consultant in Dubai, can address any VAT-related concerns within a reasonable timeframe due to their expertise and skills.

We stand out in this area by providing effective VAT assistance to our clients. Our team of professional VAT consultants not only informs clients about current and future issues but also assesses their needs and proposes suitable solutions.

HOW CAN WE HELP?

The implementation service includes half-day training for the accounting and tax staff at clients to familiarize them with the system and the aspects of the law
VAT Health Check, Tax Due Diligence, and Tax Process Audits
VAT Compliance: Preparation, Review, and Filing of Returns with the FTA
Reclaiming VAT Refunds for UAE Companies and Individuals
Tax De-Registration
Assistance in Tax Audits
Our well-versed and proficient specialists can help during tax audit announcements by addressing the FTA auditor’s queries, providing responses, attending meetings/calls, and ensuring no penalties and successful compliance.
VAT Impact Assessment and Advisory
Designing Standard Operating Procedures and Accounting System Review
Filing Reconsiderations and Voluntary Disclosures with the FTA
Filing voluntary disclosures if there was an incorrect filing done in the past

EXCISE TAX

The UAE government imposes an indirect tax known as the excise tax on products that are deemed damaging to the environment or human health. The basic objective of the excise tax is to reduce consumer appetite for these commodities and so elevate government money for the benefit of the average citizen.

With effect from October 1, 2017, the Excise Tax Federal Decree-Law No. (7) of 2017 introduced the UAE’s first excise tax on specific commodities. Later, in accordance with Cabinet Decision No. 52 of 2019, a few more products were included in the scope of excise duty with effect from the first day of December 2019. Through the FTA’s online site, all taxable entities have the right to register for excise tax in the UAE.

Goods subject to UAE Excise Tax

Carbonated Drinks: Any aerated beverage
Energy Drink: Any beverage that may contain stimulant substances that provide mental and physical stimulation and is marketed or sold as an energy drink
Tobacco and Tobacco Products: All items listed within Schedule 24 of the GCC Common Customs Tariff, including electrically heated cigarettes
Electronic Smoking Devices and Tools: All electronic smoking tools and devices, whether containing nicotine or tobacco.
Liquids used in electronic smoking devices and tools: all liquids used in such devices, whether containing nicotine or tobacco.
Sweetened Drinks: Any beverage to which a source of sugar or other sweetener is added, as determined under Standard 148 and Standard 995 of the GCC Standardization Organization

The below-mentioned groups are required to register for excise tax in the UAE.

Producers of excise goods
Importers of excise goods
Stockpilers of excise goods
Warehouse keepers are responsible for excise goods.

HOW CAN WE HELP?

Assessing the effects of excise or selective taxes on business operations and products, the effect on the tax’s valuation, determining the tax rate, etc.
Determining whether excise tax applies to the goods they imported, assisting with the client’s registration for excise tax in the UAE, and assisting with submitting monthly excise returns.
Assisting with the registration procedure for excise and selective taxes, quarterly compliance inspections, training on excise taxes, filing excise tax statements, and clarification requests, among other things.
Certain nations demand that the UAE corporation provide a tax residency certificate or a tax domicile certificate to avoid double taxation. Our team of professionals reviews the situation and works with businesses in the UAE to file and apply for a tax residency certificate effectively.

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