CORPORATE

TAX
UAE
Zahid Farooq
FCCA, CTA
 Agenda
Introduction Taxable Person Exempt Person

Registration and Tax Group and Tax Base Deductible and

• Taxable income Non-Deductible Qualifying Free
Deregistration Related Parties • Exempt Income Expenses Zone Person

CT Liability CT Liability-
Calculation & Transitional Assessments &
CT Reliefs Settlement &
Filling Rules Penalties
Refund

2
Introduction
• Direct Tax Vs Indirect Tax

• Corporate tax

• Business

• Business Activity

• State Sourced Income

• Extractive Business

• Non-Extractive Natural Resource Business

• Accounting Income

• Family Foundation

• Qualifying Investment Fund

• Qualifying Public Benefit Entity

3
 Introduction

Go-live
Public Consultation (For companies
CT Press Release & FAQs CT Law released by
Document on CT FYE on or after 30 May
published by MoF MoF
released by MoF 2023

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TAX
APPLICATION
• Taxable Person
• Exempt Person

5
 Taxable Person

Are all Family foundations and

unincorporated partnerships
taxable persons?

Which income of the natural

person is taxable?

6
Unincorporated Partnerships–(Article 16)

What is unincorporated
partnership? Can you give
some examples?
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Exempt Person

8
Extractive Business – CT Application (Article 7)
What will be treatment if small
income is drived from other
than Extractive business?

9
 Extractive Business – CT Application (Article 7)

How to apportion the shared

expenses?

10
Qualifying Public Benefit Entity–(Article 9)

Are all public benefit entities

fall under this category?
11
 Qualifying Investment Fund –(Conditions: Article 10)

a. The investment fund/fund’s manager is subject to the regulatory oversight of a competent authority;

b. Interests in the investment fund are traded on a Recognized Stock Exchange or are marketed and made
available sufficiently widely to investors.

c. The main or principal purpose of the investment fund is not to avoid Corporate

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FREE ZONES

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 Qualifying Free Zone Person–(Election: Article 19)

Can make an election to be subject to Corporate Tax at 9%

The election will be effective from:

• The commencement of the Tax Period in which the election is made or

• The commencement of the Tax Period following the Tax Period in which the election was made.

What will be treatment of the

non-qualifying Free Zone
income?
What is the criteria to
determine the qualifying Free
Zone Person?
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 Qualifying Free Zone Person–(Conditions: Article 18)
a. Maintain adequate substance

b. Derives Qualifying Income

c. No election to be subject to 9%

d. Meets Transfer Pricing requirements

e. Comply with Related party transaction rules

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TAX
REGISTRATION

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 Registration–(Article 51)
• All Taxable persons

• Exempt entities, if involve in other business activities which are not exempt

• Unincorporated partnership (if elected)

• Family Foundations (if involve in other business activities)

How will tax department know

about exempt businesses?
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 Tax Groups–(Conditions: Article 40) Why should you consider
forming the tax Group?

• Only Resident Legal entities;

• The Parent Company owns at least 95% (ninety-five percent) of the share capital of the Subsidiary,

• The Parent Company holds at least 95% of Voting rights

• Parent entity must hold 95% interest (directly or indirectly) in Subsidiary What if there is no parent
company?
• Should not be qualifying Zone Company

• Same Financial Year

• Prepare Financial using same Accounting Standards (i.e. IFRS or GAAP)

If a Government Entity have one or more subsidiaries where hold

95% or more ownership interest, it can form a Tax Group, subject to
further conditions
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 De-Registration–(Article 52)
Cessation of Business or Business Activity by

• Dissolution;

• Liquidation;

• Any other form and manner and within the timeline prescribed by the Authority

• Deregistration will be effective after payment of all tax liabilities

• Member of a Tax Group shall be treated as leaving that Tax Group from the beginning of the Tax Period
specified in the application submitted to the Authority, or from the beginning of any other Tax Period
determined by the Authority

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TAX BASE

20
Tax Base –(Article 12)

How to optimize the Corporate

Tax Base?

21
State Sourced Income–(Article 13)

What bout the interest income?

22
State Sourced Income–(Article 13)

23
State Sourced Income–(Article 13)

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Permanent Establishment–(Article 14)

• Conclude the contracts

• Negotiates contracts

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 Investment Manager Exemption–(Article 15)
Investment Manager shall be considered an independent agent when acting on behalf of a Non-Resident
Person, if:
• Engaged in the business of providing investment management or brokerage services;
• Subject to the regulatory oversight of the competent authority in the Stat;
• The transactions (commodities, real property, bonds, shares, derivatives or securities of any other
description including foreign currency) are carried out in the ordinary course of Business;
• Acts in relation to the transactions in an independent capacity;
• Carry out the transactions on arm’s length basis
• Receive compensation for the services; and
• Not a representative of non-resident person.

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TAXABLE INCOME
VS
EXEMPT INCOME

27
Taxable Income–(Article 20)

Do we require Audited
financials?

28
Exempt Income–(Article 22)

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Participation Exemption – Conditions (Article 23)

• The principal objective of the

Participation is the acquisition
and holding of shares; and

• The income of the Participation

derived during the relevant Tax
Period substantially consists of
income from Participating
Interests. 30
DEDICTIBLE
AND
NON-
DEDUCTIBLE
EXPENSES

31
Deductible Expenses–(Article 28)

How we determine
the market value?

32
Interest Expenses

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 Non-Deductible Expenses–(Article 33)
1. Donations, grants or gifts to a non-qualifying Public Benefit Entity.
2. Fines and penalties
3. Bribes or other illicit payments.
4. Dividends, profit distributions to the owner of the Taxable Person.
5. Amounts withdrawn by taxable natural person or partner in unincorporated partnership.
6. Corporate Tax imposed
7. Recoverable Input VAT.
8. Tax on income imposed on the Taxable Person outside the State.

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Related Parties–(Article 35)

35
TRANSFER PRICING–(Article 34)

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TAX LIABILITY
CALCULATION

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Calculating Tax liability

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39
 TAX RETURNS
AND PAYMENTS

40
 Tax Return

• Taxable Person must file a Tax Return, to the no later than (9) nine months from the end of the relevant Tax
Period

• The tax period is the financial year of the taxable person which is Gregorian calendar year, or the (12)
twelve-month period for which the Taxable Person prepares financial statements.

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 Tax Return
To complete a tax return for CT folloing information will be included:
a) The Tax Period to which the Tax Return relates.
b) The name, address and Tax Registration Number of the Taxable Person.
c) The date of submission of the Tax Return.
d) The accounting basis used in the financial statements.
e) The Taxable Income for the Tax Period.
f) The amount of Tax Loss relief claimed.
g) The amount of Tax Loss transferred
h) The available tax credits claimed
i) The Corporate Tax Payable for the Tax Period.

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 Tax Settlement–(Article 44)

The Corporate Tax due under this Decree-Law is settled in the following order:
 First, by using the Taxable Person’s available Withholding Tax Credit;
 Foreign Tax Credit
 Available Reliefs
 The remaining amount of the tax liability must be paid within 9 month from the end of the relevant tax
period

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 Tax Refund–(Article 49)

A Taxable Person may make an application to the Authority for a Corporate Tax refund in accordance with the
provisions of the Tax Procedures Law in the following circumstances:

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 Transitional Rules–(Article 61)

• A Taxable Person’s opening balance sheet for Corporate Tax purposes shall be the closing balance sheet
prepared for financial reporting purposes under accounting standards applied in the State on the last day of
the Financial Year that ends immediately before their first Tax Period commences, subject to any conditions
or adjustments that may be prescribed by the Minister.

• The opening balance sheet shall be prepared taking into consideration the arm’s length principle

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 Compliance Checklist

• Legal
• Contracts
• TP
• Ownership

• Accounting
• IFRS Compliance
• Financial Audit
• GL Reclassification
• Income Segmentation
• Expense Allocation

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Thank you
ZAHID FAROOQ
zahid.farooq@adventmc.com
www.adventmc.com
0568713490