United Arab Emirates: Key Highlights of the Corporate Tax Law

in a nutshell

major highlights

Federal Decree No. 47 of 2022 on Taxation of Companies and Businesses (the “Corporation Tax Law”), promulgated on 9 December 2022, requires companies operating in the UAE to understand the impact of the corporate tax regime on their companies. provides a framework for type of business.

The corporate tax law is largely consistent with the public hearing document issued in April 2022, but one notable change is the requirement that UAE Free Zone entities must meet to be eligible for the 0% tax rate. It’s a conditional release (instead of being taxed at the headline 9% rate).

The Corporate Tax Law is expected to be supplemented by further cabinet and implementing decisions aimed at providing details on the application of the various provisions and extending the definitions contained in the Corporate Tax Law.

United Arab Emirates Free Zone

Under Article 18 of the Corporate Tax Law, a Free Zone Company is considered a Qualified Free Zone Person (subject to a 0% tax rate) if it has sufficient UAE entity, earns qualifying income, and complies with the UAE. stipulated that it should be considered Transfer pricing requirements.

Covered income is generally defined as income received by a free zone entity. Therefore, it is still unclear what definition will be provided in the additional cabinet decision and whether this places a limit on income subject to the 0% tax rate.

In addition to this, it appears that mainland entities should be allowed (and in some cases were not) deductible for payments to entities in the UAE Free Zone.

Structuring before implementation

While companies should actively consider how best to structure their business operations in the light of corporate tax law, there are common countermeasures aimed at capturing transactions that do not reflect economic interests. Avoidance rules (Article 50) are included. The reality and main purpose is to obtain a tax advantage.

This regulation has been applied since the promulgation of the Corporate Tax Law and is already in effect. If your company is already undertaking a restructuring project, you should be aware of these clauses.

transfer pricing

The Corporate Tax Law also introduces the requirement for taxpayers to comply with the arm’s length principle for all transactions and arrangements with related parties. This means that appropriate transfer pricing must be charged between related parties for all arrangements. The transfer pricing methods stipulated by law are broadly consistent with the OECD Transfer Pricing Guidelines.

Taxpayers are also required to document and report how the arm’s length principle applies to related party transactions. Reporting he is done in two ways. A disclosure form that must be submitted with the tax return and, for certain taxpayers, transfer pricing documentation in the form of master files and local files that must be submitted upon request. There are no specified (financial) thresholds for the preparation of documents in the form of Master File and Local File, nor are there specified requirements for the content of transfer pricing documents. This may be consistent with OECD transfer pricing guidelines.

Other features of corporate tax law

Other important functions identified in the corporate tax law include the ability to create tax groups, group relief provisions, the ability to carry forward tax losses, no profit, no loss transfer, and business restructuring relief. will be

second pillar

As expected, corporate tax law does not address the potential adoption/implementation of global minimum tax model rules. Therefore, all businesses should prepare for the impact of UAE corporate tax until it is announced that global minimum tax rules will be adopted.

Immediate Considerations for Enterprises

If a company has already conducted an initial impact assessment based on the public hearing, it will need to conduct an additional review of this assessment to assess the impact of the corporate tax law.

If impact assessments have not been carried out (due to possible application or legislation of the global minimum tax), now is a critical time for companies to take action and conduct impact assessments.