Corporate Tax

What are Corporate Services?

What does Abstarctauditing offer to corporate services? We offer the best and most premium corporate services in the UAE. We put your business as our priority. We are well known for our financial solutions in Dubai. We have been working for a vast range of clients. These clients belong to multinational organizations from small to large businesses all around the country. What we do is value your time, that’s why we are able to provide simple, efficient, and the best possible solutions. We are leaders of the market, are committed to offering you the best services at competitive rates.

What is Our goal?

Well, our goal is to help you grow your business and become more efficient. We make it successful by providing the right support you need. Plus, we offer the latest financial technology and professional services. With our 11+ years of experience, we provide accounting and bookkeeping services in Dubai to keep your business finances on track.

Corporate Finance Services in the UAE.

What do our corporate finances have to offer?

Buyside and Sell-side Advisory services.
Mergers & Acquisitions (M&A) Advisory services.
Different Valuation Services.
Diligence and Tax Planning services.
Many Commercial and Legal Negotiations with organizations.
Banking Relationships for Different fundraising campaigns.

Benefits of Using Corporate Finance Services in the UAE

It is important to choose the right service provider in the UAE. There are some factors to see when choosing a service provider in UAE:

Finding the best Industry Experts.

The first thing to look forward to is a firm with plenty of experience in your industry. This will help you with better advice and shape plans for your business.

What Services do you want?

Some organizations specialize in specific areas of capital raising. At the same time, others offer a full range of services.

Track Record of the company.

Find and research about the firm’s experience and reputation. A good track record with clients will help you succeed.

What fees and Pricing you afford?

The most important thing is to understand the cost related to your services. The pricing structure should be clear enough to be handled by your budget.

What Do Corporate Finance Services in the UAE Include?

Corporate finance services cover most of the areas that help organizations with their financial needs:

Capital Raisings.

If you need funding for a business or want to start a new business, our specialists can help you with debts, equity, or other financing sources.

Mergers & Acquisitions (M&A).

It requires proper financial planning. Our experts help you with

Selection of assets.
Valuation.
Deal structuring.
Negotiations.

The Restructuration and increase profitability.

If your business suffers financial problems, we can help create different plans for you such as

Restructuring.
Improving cash flow.
Increasing profitability.

The Valuation of finances.

Our finance experts will help you design different financial models. They will help you better your business performance, less risk, and better decisions.

The best possible way to decrease Financial Risk.

Managing financial risks is key to a successful business. Our finance advisors will help

Identification of risks.
Managing risk.
Protection from different risks.

KEY POINTS

The Corporate Tax Law will be effective from 1 June 2023 with a headline rate of 9%.
The regime includes features that represent best practices in international taxation.
Several exemptions are available for businesses operating across strategic sectors.
Free zone persons can continue to maintain their 0% tax position subject to meeting certain conditions.

Background

On 9 December 2022, the UAE MoF published the Corporate Tax Law, which will be effective from financial years starting on or after 1 June 2023. This follows the public consultation document released on 28 April 2022, which describes the main features of the planned CT regime, as well as the principles applied in the design of such regime.

Taxable person

Generally, CT will apply to both resident and nonresident persons.

A resident person will include:

A juridical person incorporated otherwise established or recognized in the UAE (including free zones)

A juridical person incorporated otherwise established or recognized outside of the UAE, that is effectively managed and controlled in the UAE

A natural person that conducts business activity in the UAE

A nonresident person can be subject to CT if it has a permanent establishment (PE) in the UAE, derives UAE-sourced income or has a nexus in the UAE (nexus rules are still to be specified through a Ministerial Decision).

Exemptions

Under certain conditions, the following persons will be exempt from CT:

A person engaged in the exploitation of UAE natural resources (both extractive and non-extractive)

Government and Government-controlled entities

Qualifying public benefit entities

Charities and public benefit organizations

Pension or social security funds

Qualifying investment funds

Tax base

UAE businesses will be subject to CT on their worldwide income. However, dividend income and capital gains will be exempt, subject to meeting the conditions of the participation exemption. The Law also provides for a foreign branch profits exemption where those profits have been subject to tax overseas at a rate of at least 9%. Foreign tax credit will be available for taxes paid overseas on forms of income that are not exempt from UAE CT. Natural persons that are UAE residents and subject to CT will be taxable only on the income earned from business activities undertaken in the UAE. Nonresidents will be subject to CT on any taxable income attributable to a PE or nexus in the UAE or any income that is considered UAE-sourced income.

Permanent Establishment

Nonresidents will be considered to have a PE in the UAE if they have a fixed place of business or a dependent agent in the country. The language used in the Law to describe these tests seem broadly aligned with Organisation for Economic Co-operation and Development (OECD) standards. The Corporate Tax Law states that other forms of nexus in the UAE that could create a PE will be determined through a Ministerial Decision.

UAE-sourced income

The Corporate Tax Law provides several examples of income that will be considered as UAE-sourced income. Generally, income earned by a UAE resident person will qualify as UAE-sourced income. Similarly, UAE-sourced income will also include any income derived from activities performed, assets located, or rights used for economic purposes in the UAE.

Free zones

The Corporate Tax Law introduces the concept of a “Qualifying Free Zone Person” (QFZP), which is broadly defined as a company or branch registered in a free zone that:

Maintains adequate substance in the UAE

Derives qualifying income (to be specified through a Ministerial Decision)

Satisfies transfer pricing requirements

Meets any other conditions to be prescribed through a Ministerial Decision

A QFZP will still be subject to CT but may benefit from a 0% rate on its qualifying income. A QFZP can elect to forego this preferential regime and be subject to the standard CT rate.

Taxable income

The accounting income as reported in the standalone financial statements will be the basis to determine the taxable income. This will be subject to adjustments, which include:

Unrealized gains or losses which arise in connection to capital items

Income and associated expenses derived by an exempt person with respect to its exempt activity

Dividend income and other profit distributions from a resident person

Dividend income and capital gains under the participation exemption

Income from a PE not located in the UAE that has been subject to CT at a rate of at least 9%

Income derived by a nonresident from the operation or leasing of aircrafts and ships in international transportation

Gains or losses from reorganizations or intragroup transfer of assets and/or liabilities subject to certain conditions

Net interest expenditure will be capped at 30% of the EBITDA (earnings before interest, taxes, depreciation, and amortization)

Entertainment-related expenses will be deductible up to 50% of the amount incurred

With respect to the interest deduction limitation, the Corporate Tax Law indicates that the amount of disallowed expenditure can be carried forward for a period of 10 years. Additional restrictions can apply to related-party debt.

The Corporate Tax Law also provides an additional list of non-deductible expenses which includes donations, administrative penalties, recoverable value-added tax (VAT), dividends or similar benefits paid to an owner of a taxable person, among others.

Tax loss relief

Businesses will be able to carry forward tax losses indefinitely, subject to certain conditions. These losses can be used to offset up to 75% of the taxable income of future tax periods. Losses incurred before the effective date of CT will not be eligible for relief.

Tax groups

A parent entity of a group can make an application to the FTA to form a tax group with its UAE subsidiaries, subject to meeting certain conditions. These conditions include a 95% ownership requirement and neither the parent nor subsidiary can be an exempt person. Losses can also be transferred between entities outside of a group where a 75% ownership relationship exists, other conditions being met.

Withholding tax

Administration

UAE businesses subject to CT are required to register and obtain a Tax Registration Number. Generally, the registration application must be submitted to the FTA before the Law becomes effective. Further guidance is expected in this respect.

UAE businesses subject to CT, including QFZPs, will be required to file a tax return and pay any tax due no later than nine months after the end of the financial year. The parent companies of tax groups need to submit only one tax return.

Additionally, UAE business may be requested to submit financial statements to the FTA. Taxpayers may also be requested to maintain audited or certified financial statements.

Transfer pricing (TP)

Transactions with related parties and connected persons are required to comply with the arm’s-length principle. The language used in the Corporate Tax Law to define the arm’s-length principle and other TP-related aspects is generally similar to OECD standards. However, the definitions of related parties and connected persons are broad, relative to international standards. For instance, under certain conditions, kinship up to the fourth degree may trigger a related party or connected person relationship.

The Corporate Tax Law requires UAE businesses to maintain TP documentation (i.e., master file and local file), subject to certain conditions which will be prescribed under a Ministerial Decision. TP documentation must be submitted to the FTA within 30 days of a request.

Further, taxpayers may be required to submit a TP disclosure form along with the CT return. More details in this respect are expected to follow in a Ministerial Decision.

Businesses will be able to apply for advanced pricing agreements and more details are also expected to follow in this respect.

A more detailed alert regarding the features of the UAE TP regime will follow soon.

General anti-abuse and transitional rules

The Corporate Tax Law includes general anti-abuse rules (GAAR) intended to disregard transactions or arrangements undertaken with the main purpose of obtaining a CT advantage. These rules apply from the date the Law is published in the Official Gazette.

As part of its transitional rules, the Corporate Tax Law also indicates that the opening balance sheet for CT purposes will be the closing accounting balance sheet for the financial year immediately before the first tax year.

Implications

The implications of the new CT regime are far-reaching for all businesses operating in the UAE, and natural persons undertaking a business activity. Businesses and natural persons should begin to assess the implications of the new rules. This includes assessing the application of the rules, modelling the cash flow implications, considering the exemption regimes, and developing the processes and procedures to manage compliance. As further details are released over the coming months through a series of Ministerial Decisions, businesses should continue to monitor these developments and prepare for compliance ahead of the effective date.

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FAQ's

Frequently Asked Questions

What is the difference between accounting and bookkeeping?

We know the complexities of the UAE’s financial environment, from ESR and UBO reporting to ever-evolving FTA guidelines. Whether it’s VAT registration, quarterly filings, or audit prep, we handle it with precision.

Why should I work with a Dubai bookkeeping and accounting company?

Do Dubai's accounting services qualify for tax deductions?