#The Corporate Tax in UAE

[theprivatewolf]

Taxes In UAE For Foreigners: Everything You Need To Know

The United Arab Emirates (UAE) is known for its dynamic business environment, luxurious lifestyle, and tax advantages. For foreigners looking to work, invest, or set up businesses in the UAE, understanding the country’s tax system is crucial. In this guide, we will explore the ins and outs of taxes in the UAE for foreigners.

Basic Overview of the UAE Tax System

The UAE operates on a territorial tax system, which means that taxes are imposed only on activities that occur within the country’s borders. This tax system has several key components:

No Personal Income Tax: Individuals in the UAE, including foreigners, are not subject to personal income tax. This is a significant advantage for expatriates.

No Capital Gains Tax: There is no tax on capital gains in the UAE, making it an attractive destination for investors.

No Inheritance Tax: The UAE does not impose inheritance tax on the transfer of assets upon a person’s demise.

Income Tax in UAE for Foreigners

As mentioned, there is no personal income tax for individuals in the UAE. This means that foreign workers can enjoy their earnings without the burden of income tax deductions, allowing them to save more of their income.

VAT in UAE

The UAE introduced Value Added Tax (VAT) in 2018. Currently set at 5%, VAT applies to most goods and services, but there are several exceptions, including essential food items, healthcare services, and education. Businesses with an annual turnover exceeding the mandatory threshold must register for VAT.

Other Indirect Taxes Foreigners Should Be Aware Of

In addition to VAT, the UAE imposes excise taxes on specific goods, such as tobacco products and sugary drinks. Understanding these taxes is essential, as they can significantly affect the cost of certain items.

Tax Obligations for Foreign Companies

Foreign companies operating in the UAE should be aware of the following tax obligations:

Corporate Income Tax: As of now, the UAE does not impose corporate income tax on businesses, which is advantageous for foreign companies operating in the country.

Withholding Tax: The UAE generally does not impose withholding tax on dividends, interest, or royalties, but it’s essential to review the specifics of tax treaties between the UAE and your home country.

Tax-Free Zones for Foreign Businesses

The UAE offers various free zones designed to attract foreign investment. Companies registered in these zones can benefit from 100% foreign ownership, no import or export duties, and no personal income tax for employees. Some of the popular free zones include Dubai Multi Commodities Centre (DMCC), Jebel Ali Free Zone (JAFZA), and Abu Dhabi Global Market (ADGM).

Navigating the UAE Tax Landscape

Navigating the UAE tax landscape can be complex, especially for foreign businesses and investors. It’s advisable to seek professional guidance from tax advisors and consultants who are well-versed in UAE tax regulations. This will help ensure that you comply with all obligations and take full advantage of the tax benefits the UAE has to offer.

In summary, the UAE’s tax system is highly favorable for foreigners. With no personal income tax, a reasonable VAT rate, and numerous tax-free zones, it’s a prime destination for expatriates, entrepreneurs, and investors looking to make the most of their earnings and business opportunities. However, staying informed about tax regulations and consulting experts is essential to make the most of the UAE’s tax advantages.

M.Hussnain

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corporations aren't people, deadname them all you want

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The Taxpoint- Best Tax Consultant In Dubai.

Discover the pinnacle of tax expertise at The Tax Point, the best tax training services in UAE, we provide the best consultation services in UAE, offering unparalleled tax consultation and advisory services. Our team of experienced professionals specializes in providing professional tax advisory services, ensuring business success. With a commitment to excellence, we offer tailored solutions, strategic planning, and expert guidance for businesses to satisfy their tax needs. Choose The Tax Point for professional tax advisory services in UAE. Your journey to financial success starts here.

[masarca]

“Do you have branches for your business?”

The Tax-payable and all his branches will consider as one only for TAX purposes, and he will get only one TAX registration number for all branches.

Looking for insights or have questions about Tax registration? Don't hesitate to connect with us and share your thoughts. We're here to provide guidance and support you every step of the way. Reach out today and let us assist you with all your TAX-related needs. Please Visit Our website.

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[hhslawyers]

UAE Corporate Tax Awareness Seminar

[simplysloved]

Everything You Need to Know About Corporate Tax in UAE

Corporate tax is an essential aspect of running a business in the UAE. With its favorable tax laws and a favorable business environment, the UAE has become a hub for foreign investors. It makes it crucial to have a deep understanding and read the information on the corporate tax system in the UAE, in order to make the most of its benefits. This article will help you understand corporate tax in the UAE by explaining rules, regulations and its benefits in the UAE.

Introduction to Corporate Tax in UAE

There is no personal income tax in the UAE, because of which UAE has a tax-free environment, making it an attractive country to live in for most people. However, corporations are subject to corporate tax on their income earned in the UAE. The introduction of CT in this region was intended to help UAE with the transformation and development that the government has strategically planned to achieve. The country’s tax laws are enforced and implemented by The UAE Federal Tax Authority (FTA). The authority also provides guidelines and regulations for corporations and businesses operating in the UAE. Corporations need to be abiding by these laws and regulations to avoid getting penalized.

The Corporate Tax Law in the UAE

The corporate tax law in the UAE is regulated by the Federal Tax Authority, which oversees the implementation and enforcement of the country’s tax laws. The CT law applies to all businesses operating in the UAE, regardless of their size or structure. The tax is levied on a company’s profits, and the rate at which the tax would be at, depends on the type of business and the industry in which it operates.

Corporate Tax Rates in the UAE

The CT rate depends on the type of business and industry that it operates in, hence there is no standard CT rate in UAE. Oil and gas, insurance, and banking are however, some industries that are exempt from CT. The tax rate for other industries ranges from 0% to 55%.

Benefits of Corporate Tax in UAE

The UAE offers several benefits for corporations, including:

No personal income tax

A favorable tax environment for businesses

A stable and predictable tax system

A streamlined process for tax registration and compliance

Access to a large pool of potential customers and investors

Corporate Tax Filing and Compliance in the UAE

It is necessary for corporations operating in the UAE to file their tax returns on an annual basis. The tax returns must be filed with the Federal Tax Authority(FTA) by the end of the financial year. The tax returns must include detailed information on the corporation’s income and expenses, and must be supported by financial statements and other relevant documents.

Common Mistakes to Avoid in Corporate Tax in UAE

To ensure compliance with the CT laws in the UAE, it is important to avoid common mistakes, including:

Not registering for CT

Filing incorrect or incomplete tax returns

Failing to keep accurate financial records

Not seeking professional advice

FAQ

Q: Is there personal income tax in the UAE?

A: No, there is no personal income tax in the UAE.

Q: Who is responsible for implementing and enforcing corporate tax laws in the UAE?

A: CT laws are enforced and implemented by The Federal Tax Authority (FTA) in the UAE.

Q: What is the standard corporate tax rate in the UAE?

A: The rate depends on the type of business and the industry in which it operates. There is no standard ct in the UAE.

[simplysolvedagency]

Everything You Need to Know About Corporate Tax in UAE

Corporate tax is an essential aspect of running a business in the UAE. With its favorable tax laws and a favorable business environment, the UAE has become a hub for foreign investors. It makes it crucial to have a deep understanding and read the information on the corporate tax system in the UAE, in order to make the most of its benefits. This article will help you understand corporate tax in the UAE by explaining rules, regulations and its benefits in the UAE.

Introduction to Corporate Tax in UAE

There is no personal income tax in the UAE, because of which UAE has a tax-free environment, making it an attractive country to live in for most people. However, corporations are subject to corporate tax on their income earned in the UAE. The introduction of CT in this region was intended to help UAE with the transformation and development that the government has strategically planned to achieve. The country’s tax laws are enforced and implemented by The UAE Federal Tax Authority (FTA). The authority also provides guidelines and regulations for corporations and businesses operating in the UAE. Corporations need to be abiding by these laws and regulations to avoid getting penalized.

The Corporate Tax Law in the UAE

The corporate tax law in the UAE is regulated by the Federal Tax Authority, which oversees the implementation and enforcement of the country’s tax laws. The CT law applies to all businesses operating in the UAE, regardless of their size or structure. The tax is levied on a company’s profits, and the rate at which the tax would be at, depends on the type of business and the industry in which it operates.

Corporate Tax Rates in the UAE

The CT rate depends on the type of business and industry that it operates in, hence there is no standard CT rate in UAE. Oil and gas, insurance, and banking are however, some industries that are exempt from CT. The tax rate for other industries ranges from 0% to 55%.

Benefits of Corporate Tax in UAE

The UAE offers several benefits for corporations, including:

No personal income tax

A favorable tax environment for businesses

A stable and predictable tax system

A streamlined process for tax registration and compliance

Access to a large pool of potential customers and investors

Corporate Tax Filing and Compliance in the UAE

It is necessary for corporations operating in the UAE to file their tax returns on an annual basis. The tax returns must be filed with the Federal Tax Authority(FTA) by the end of the financial year. The tax returns must include detailed information on the corporation’s income and expenses, and must be supported by financial statements and other relevant documents.

Common Mistakes to Avoid in Corporate Tax in UAE

To ensure compliance with the CT laws in the UAE, it is important to avoid common mistakes, including:

Not registering for CT

Filing incorrect or incomplete tax returns

Failing to keep accurate financial records

Not seeking professional advice

FAQ

Q: Is there personal income tax in the UAE?

A: No, there is no personal income tax in the UAE.

Q: Who is responsible for implementing and enforcing corporate tax laws in the UAE?

A: CT laws are enforced and implemented by The Federal Tax Authority (FTA) in the UAE.

Q: What is the standard corporate tax rate in the UAE?

A: The rate depends on the type of business and the industry in which it operates. There is no standard ct in the UAE.

[forthrightconsultancy]

Get The Best Accounting Services In UAE

At Forthright Consultancy, we provide accounting and corporate tax services in the UAE. We work with companies of all sizes to ensure that their financial affairs are in order and that they are compliant with UAE laws. We offer a comprehensive range of accounting services that covers all aspects of accounting and tax, and our team is composed of experienced professionals who are experts in their field. Whether you need assistance with bookkeeping, VAT returns, tax planning, or any other accounting or tax matter, we can help. We are committed to providing a high-quality, professional corporate tax in UAE service that meets the needs of our clients. Contact us today to find out more about how we can help you.

[thefirstcheckconsultant]

A Guide to Choosing The Best Audit Firm in 2025 in UAE

Choosing the best audit firm from the accounting companies in UAE needs certain considerations and requirements to be performed for a business domain. With the following guide, you can take the firm decision to select the best accounting firm in Abu Dhabi in 2025.

Identify your requirements

There is availability of numerous accounting and bookkeeping companies in UAE, for selecting the best one always identify the type of audit you are in need of as - financial, forensic, compliance or internal audit. Evaluate the workings of the audit firms who have expertise with in your industry, so as to analyse the scaling of the audit firm to handle with the complexities of a firm.

Assess with Regulatory Compliance

Take a research in evaluating the assess of the accounting companies in UAE, whether they are expertise in UAE Vat laws, Corporate tax or in the Excise tax. Always ensure that the firm follows International Financial Reporting Standards for being compliance with UAE regulatory compliance. The firm must adhere all the free zone regulations and federal economic legislation too.

Evaluate Team Expertise

Always checkout the team of the concerned accounting firm in UAE if they are experienced in your business sector. Evaluate their team of professionals including Charted Accountants, Certified Public Accountants and so on. The diversity and multilingual capabilities of an audit firm in UAE plays the crucial role in the seamless and effective client’s engagement as multilingual auditors cal liaise with the foreign investors aligning for the global compliance with the UAE requirements.

Credential Evaluation

Check the reviews, references and the testimonials for analyzing the firm’s reputation. Always choose the firm who has already proven themselves as the best internal audit consultants in UAE. Check if the audit firm is approved by the authorities like Dubai Financial Services Authority, Abu Dhabi Global Market and Ministry of Economy.

Evaluate Customer Service and Communication

Ensure about the customer service of the audit firm weather they provide the regular updates and reports for the auditing process. Ensure about their effectiveness and quirky response for the queries generated. Check if they can provide the tailored solutions for the different approaches or the observations. Ensure that the firm uses modern audit tools and software for the efficiency.

Requesting Proposals

The audit firms which you have shortlisted, ask them for the detailed proposals and also compare their offerings and the client reference. This process is critical for ensuring that the audit firm you are choosing aligns with the basic needs of your business and provides the best value to you. This proposal includes negotiate fees, timelines and deliverable with the selected firm.

Contemplate accessibility with Location

If you are operating in a free zone, always select the firm which are familiar with the specific rules and regulations. Choose an accounting firm in Abu Dhabi whose office is near by the location of your office area or within your emirate for the convenience. And also ensure about the firm to provide you the clear breakdown of the cost which must be aligned with your budget and without compromising with the quality work.

By following this approach you will evaluate the value of the services; the auditing firm is offering you and helps you in selecting the right internal audit consultants in UAE.

Wrap-up

The First Check Consultants focuses on UAE businesses and regulatory requirements whose expertise team always provides unique insights into the market trends and business strategies in multicultural environment of UAE’s globalized market.

[avyancoauditing]

Corporate Tax in UAE Updated Guide

Confused about the implications of the recently introduced corporate tax in the UAE? We can help! The UAE's new corporate tax regime, effective in 2022, imposes a 9% tax on profits exceeding AED 375,000. While some businesses may qualify for exemptions, all businesses must navigate new registration and compliance requirements. Learn more about how this tax may impact your specific situation and how our accounting and auditing expertise can ensure a smooth transition. Visit our blog for a comprehensive breakdown of the UAE's corporate tax and its implications for your business.

[jaksuae]

THE ESSENTIALS OF CORPORATE FINANCE

Corporate finance is the lifeblood of any enterprise. It helps guarantee that a firm has the cash flow needed to implement its strategies and generate returns for its partners. It will be helpful to consider some fundamental priorities of corporate finance and its relevance in modern business.

What is corporate finance?

Corporate finance is the financial management of a company to create worth for shareholders. It comprises all forms of capital investments, cost control, financial planning, and analysis. The final objective is derived from the responsibility of controlling the risks taken while at the same time maintaining the company’s profitability so as to have adequate funds to operate, expand, and invest.

Some essential areas in corporate finance include performance evaluation, corporate capital structure, and working capital management.

1. Capital Budgeting

Capital budgeting, or investment appraisal, values a firm’s long-term investments. It also involves evaluating which investment projects should be undertaken to realize the greatest returns. Some tools for assessing such opportunities include Net Present Value (NPV) and the Internal Rate of Return (IRR).

2.Capital Structure

One of the most important areas in corporate finance is an optimal combination of debt and equity financing. This is so because it involves determining the amount of debt, all kinds of sources to borrow the funds from, and managing a company's overall liabilities.

Valuing capital structure is a great challenge as it aims to minimize the cost of capital and maximize the shareholder’s value.

3.Working Capital Management

WCM is the management of joint short-term resources and accounts, which determines a company's satisfactory operation and ability to pay its short-term debts. This comprises stock management, accrued receivables, and other accrued expenses. Working capital management helps increase a company's liquidity position, reduce overall expenses, and raise profitability.

4.Financial Risk Management

It also involves evaluating and managing financial risks within an organization. Possible credit risks include those connected with interest rates and exchange rates. Different corporations employ derivatives as one financial tool to mitigate these risks and preserve their balance sheets.

Why Corporate Finance Matters

To be more precise, a subject that deals with the financial framework of prominent organizations and companies' finance is called "Corporate Finance" and has 24-hour video tutorials that are available for anyone interested in mastering it to be able to propel the business forward. It helps companies:

Make informed investment decisions: The required resources can be used appropriately if potential investments and expected returns are adequately assessed.

Optimize capital structure: Managing a firm's capital structure by adopting an optimal debt-to-equity ratio is cost-effective to the overall cost of capital and increases shareholders' value.

Enhance liquidity and profitability: Working capital management enables organizations to manage their operations, fulfill their obligations, and invest crucial resources in viable projects.

Mitigate financial risks: Performing risk management well in advance reduces companies' adverse economic effects and guarantees stability.

Final Thoughts

Corporate finance is a challenging yet crucial area that ensures the attainment of corporate business goals. From evaluating potential investment outcomes to mitigating fiscal risks, corporate finance professionals assist organizations in attaining their objectives. The evaluation of this paper was geared towards establishing the elements that are vitally important in the field of corporate finance to help formulate corporate strategies for better financial performance for sustainable growth.

[shuraatax]

Understanding UAE Corporate Tax Exemptions

The UAE has always been a favourite destination for businesses and investors because of its tax-friendly environment and strong economy. For years, businesses have thrived without worrying about corporate taxes. However, with the recent introduction of corporate tax, things have changed slightly to align with global standards and support the country’s growing economy. 

The good news? Not all businesses need to pay corporate tax. The UAE government has introduced various exemptions to support free zones, government entities, and other qualifying businesses. 

So, let’s break down everything you need to know about UAE corporate tax exemptions, including who qualifies, what the rules are, and how your business can benefit. 

[tsac-uae]

corporate tax in dubai, UAE- Tsac-uae

corporate tax in dubai, UAE �� Navigate the complexities of the UAE's corporate tax landscape with our expert advisory services. Our team provides comprehensive solutions tailored to your business needs, ensuring compliance

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Feel free to connect and share your thoughts. We’re happy to help you throughout the process.

Please Visit Our website for Free Consultancy. We are Always Available for you.

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[vataccountingae]

A Guide to Corporate Tax Registration in UAE

The UAE had a global magnet, known for business and attracting entrepreneurs and companies from the farthest corners of the world, since its creation, entirely because of the tax-friendly environment in the region. Now, however, this dimension has added another corporate tax side to the region’s business ecosystem. Corporate tax registration has now become one of the key steps for businesses running in the UAE, as it ensures compliance with the tax system in the country. This document contains everything you need to know with regard to corporate tax registration in the UAE, looking specifically at Dubai’s business landscape, including VAT Accounting at the UAE as an essential guide in this process.

What is Corporate Tax in the UAE?

It is a direct tax on the net income or profit of a company. Part of the UAE-wide strategy to broaden the economy and adhere to international criteria on business taxation, corporate tax is paid by businesses only when they reach a specific threshold of income.

The Introduction of Corporate Tax in UAE can be summarized as follows:-

Tax Rate: 9% of the taxable income exceeding AED 375,000.

Exceptions: All free zone entities (which meet certain conditions) and entities dealing with extraction of natural resources are exempted from corporate tax.

This indicates another remarkable shift in tax policy in the United Arab Emirates, and it makes taxation more transparent, fair, and sustainable in economies.

Why registration for Corporate Tax in UAE is Compulsory?

Any business that operates in the UAE and has its income above the threshold has to register for corporate tax. There can be severe penalties, damaged reputations, and little or no room for operations if one does not comply. The Register would ensure:

Compliance with Federal tax authority (FTA) regulations.

Legal operations inside the United Arab Emirates.

Avoidance of fines and penalties.

Better credibility with stakeholders and partners.

Whether you are running a start-up or a multinational, it exempts one from demonstrating compliance and good governance by that corporate tax registration.

There are four steps to follow to register for corporate taxes in the UAE.

1. Know the eligibility criteria.

Before wanting to register, check whether your business is covered under corporate tax. To be eligible under UAE corporate tax, your business must:

Make an annual income of AED 375,000 or more.

Trade as a mainland or free zone entity or branch of a foreign entity.

2. Collect the Required Documents

Gather the following documents as needed:

Trade license

Certificate of Incorporation

Memorandum of Association (MOA) or Article of Association (AOA).

Financial accounts for the previous year.

Valid UAE identity of stakeholders.

3. Register via the FTA Portal

Tax registration services are fully available online through the Federal Tax Authority (FTA). Register for an account, then fill in a corporate tax registration form with accurate details.

4. Pay Relevant Fees

Make sure that you have paid all required registration fees to finish this procedure.

5. Keeping Current with Compliance

Newly registered businesses will need to ensure compliance with different requirements, such as:

Filing tax returns.

Keeping up-to-date financial records.

Keeping abreast with the updated tax laws.

Corporate Tax Registration in Dubai: The Essentials.

Flocking to Dubai offers important features regarding corporate tax registration, especially because the place serves as a hub for companies around the globe.

Free Zone Entities: A free zone business may obtain tax exemptions if all certain conditions are met, such as not doing business with the mainland UAE.

Multinational Companies: Tax reporting must be in accordance with recognized international standards for foreign-owned companies having branches in Dubai.

Startups and SMEs: Small businesses must check if their income crosses the level that leads to the corporate tax burden.

These scenarios require professional consultancy such as VAT Accounting UAE.

Benefits of VAT Accounting in the UAE

Registering for tax and compliance requirements is very difficult and complex, especially inthe case of a business that has little understanding of tax laws in the UAE. Value-added tax accounting in the UAE is purposely simplifying it for a business by offering tailored services according to your business needs. Here’s how they help:

1. Tax Eligibility Expert Guidance

The next stage is to comprehend if your Business needs to pay tax or not. For this purpose value added tax accounting in the UAE provides holistic evaluation of tax responsibility.

2. Document Preparation

Documentation is a very important factor in the registration process. The team makes sure that every document matches and has the right content so that there are no hold-ups.

3. FTA Portal Assistance

The FTA portal could be heavy-duty. All of the registration process is completed within VAT Accounting UAE while making sure that the submission is within time.

4. Compliance Management

After registration, the maintenance of compliance is as important as the registration itself. Such services:

File all accurate tax returns.

Account for all transactions in a detailed manner.

Knowledge of regulatory amendments.

5. Custom support to Dubai businesses

Dubai’s tax environment will need more finesse due to the unique challenges posed by the environment. VAT Accounting UAE has a good understanding of the unique challenges and therefore offers solutions tailored for free zone and mainland entities.

Corporate Tax Registration Issues

1. Tax Law Awareness

Corporate tax registration UAE is relatively recent; hence, businesses may have a problem understanding its effects.

2. Documentation Mismatches

Incorrect or incomplete documents can waste time and end up with a rejection.

3. Compliance Overload

A complete record, made on time, is needed for the maintenance of tax compliance.

4. Free Zone Exemptions

Qualifying free zone businesses may find this more complicated than expected.

However, with the help of VAT Accounting UAE, businesses can easily deal with these obstacles and also have stress-free registration.

Tips for Smooth Corporate Tax Registration

Hurry Up: Avoid the Last Minute Rush-start the Registration process at the earliest once you are eligible.

Be Informed: Keep abreast of the latest announcements and guidelines from the FTA

Hire Professionals: Get tax registration and compliance sorted by getting the experts on board, for example, VAT Accounting UAE.

Check Financial Records: Confirm up-to-date accuracy of financial statements for registration purposes.

Find out the law on Free Zone: Confirm exemption entitlement for any activity conducted in a free zone and ensure compliance with the specified rules.

The Future of Corporate Taxation in the UAE

The conforming of registration for corporate taxation in the UAE involves not merely following all necessary regulations but signifies also the move to have a mature economy where diversification is viewed as essential. Therefore, adaptation would call for all businesses to move toward compliance and transparency to avoid being outperformed by others.

Dubai is now at the forefront of this kind of change, becoming the nexus for international business activity and stimulating a number of growth and innovation opportunities.

It is not just about fulfilling the obligations but also ensuring that businesses align with credibility and operational efficiency, which can be optimized for those using companies such as VAT Accounting UAE.

Conclusion

Corporate tax registration is also a key milestone for businesses that want to establish the legibility of their operations within the UAE. It may be complex; hence most businesses have to partner with experts like VAT Accounting UAE to ease this step. They have ensured that their solutions are tailored from knowing the eligibility part to what compliance entails, which puts a business on the right track.

Be it corporate tax registration in Dubai or handling tax obligations across the UAE, VAT Accounting UAE promises to hold your hand through all the stages. Start the journey towards compliance and business growth today!

[simplysloved]

What Is Transfer Pricing & How Does It Impact My UAE-based Business?

What is Transfer Pricing?

Since the implementation of Corporate Tax in UAE, The notion of Transfer Pricing (TP) is receiving more attention in the Ministry of Finance (MoF) released Questions and Answers along with public Consultation documents.

This idea could be new for many local-owned companies, leading to numerous concerns and Transfer Pricing considerations for implementation. The topic of this article is Transfer Pricing, and its implications within The UAE will be reviewed to provide more information for businesses.

The standard definition of the term “transfer pricing” is commonly referred to as:

“The prices of goods and services sold or purchased between the entities with associated parties.”

When a related party refers to an entity or person who has a prior connection with a business by control, ownership, or family kinship (in instances of natural people).

Naturally, related-party transactions may allow entities to shift profits artificially. Therefore, this UAE corporate tax introduction strongly emphasizes transfer pricing.

The world’s tax justice network defines Transfer Pricing as “a technique used by multinational corporations to shift profits out of the countries where they operate and into tax havens.”

Both definitions explain that transfer prices are a way to make money. But it’s helpful to go back and expand the definition. It is essential to clarify that Transfer Pricing refers to the following:

A tax law to prevent abuse was enacted to implement the  “arm’s length” principle.

It is a requirement that the price of the goods and services  that the respective parties charge must be precisely the same as they     would have been being the parties involved in each transaction were     connected.

The goal of the arm’s-length rule and the Transfer Pricing (“TP”) regulations is to ensure that there isn’t any price mispricing of transfers, which can be due to fraudulent transfer Pricing methods, in which the prices of transfers are deliberately manipulated to obtain certain tax benefits which benefit several related entities.

Transfer pricing is of crucial importance to corporate taxation. Transfer prices directly impact the distribution of losses and profits for companies that are who are taxed by the corporate tax. The Transfer Pricing practices of taxpayers could have an immediate impact on the tax revenues of a nation.

When the corporate tax rates of the countries concerned differ substantially, related parties might be motivated to establish their transfer rates so that they can allocate profits to the less tax jurisdiction, thus reducing the total (group) global tax burden for corporations.

Even when a country has lower tax rates and is not governed by Transfer Pricing laws, transfer mispricing can take away significant tax revenue.

For instance:

Company A, a tax resident of Bangladesh, manufactures electronic devices and personal computers in a country taxed at a rate of 32.5 percent. It sells its items to the UAE-related tax-resident company B which pays 0 percent or 9% corporate tax on the resale of its products in third markets and UAE.

In this scenario, company A will be driven to offer the product at a price or with a lower profit percentage to Company B. In contrast, Company B will be able to resell the product with the highest possible profit margin and take the more significant part of the profits to ensure that both entities pay corporate taxes at a lower efficient tax rate.

Tax authorities in Bangladesh are likely to audit and modify the tax on corporate income paid by company A, thereby taxing a substantial portion of the profits that the UAE taxes.

Suppose company B was to pay taxes on corporate income in the UAE.

In that case, company B is likely to be keen to reduce the tax paid by the UAE to reduce and eliminate the phenomenon known as “economic double taxation” through the Transfer Pricing adjustment. That’s why countries with corporate tax systems should create transfer pricing laws and an administrative capacity to deal with the request for adjustment.

Additionally, as accounting and legal tax laws and practices vary from country to country, It is of the utmost importance to be aligned with the Transfer Pricing law to ensure that the adjustments to TP are based on the same rules and principles as the Transfer Pricing method.

Will It Impact A UAE-Based Business?

The simple answer is yes. The official MoF documents ( Press release  and Public Consultation) stipulate that UAE businesses must adhere to Transfer Pricing rules and the requirements for documentation by the Transfer Pricing Guidelines.

As part in the Corporation Tax introduction as part of the Corporate Tax introduction, the UAE will implement Transfer Pricing rules, which means that all transactions with related parties and those that involve connected individuals (“intercompany transaction”) will have to conform to the applicable TP requirements according to the principle of arm’s length that is outlined in the OECD Transfer Pricing Guidelines.

Who are the Related Parties?

By the UAE Corporate Tax Consultation Document [2(the (“Consultation Paper”), A related person is an individual or an entity with already established a connection to a business by control, ownership, or family kinship (in cases of natural people).

The document also lists these relationships in the form of related parties:

Two or more people connected with the 4th degree of kinship,     affiliation, or kinships such as marriage, birth, or adoption.

When alone or in conjunction with a partner, a person, or a legal entity, the individual directly or indirectly holds more than 50% of this legal entity.

A legal entity or two in which one legal entity or in conjunction with a related entity directly or indirectly, has more than 50% part in or controls each legal entity

More than two legal entities, if an individual taxpayer or together with a partner who directly or indirectly owns 50 percent of each.

A taxpayer, its branch, or permanent establishment

The partners in the same unincorporated partnership and

Business activities that are exempt and non-exempt of the same individual (for instance, an exempt-free zone-based business).

Who Are Connected Persons?

Consultation Paper Consultation Paper stresses that in the absence of taxation on personal income in the UAE, individuals who own tax-deductible companies would be encouraged to reduce the UAE corporate tax base through excessive payments to themselves and others who are associated with them.

So, benefits or payments offered by a company for the “Connected Persons” will be tax-deductible only if the company can prove that the benefit or payment conforms to “arm’s length” or the “arm’s length principle” and that the cost is incurred entirely and solely for the benefit of your business.

Connected Persons differ as Related Parties. A person is regarded as being ‘connected’ to a business in the scope of the UAE Corporate Tax regime it is:

A person who directly or indirectly holds an ownership control or interest in the taxable person

Director or Officer of a taxable person.

An individual who is related to the director, owner, and Officer of the tax-paying person in four degrees of affinity or kinship, such as through marriage, birth, or adoption.

If the tax-paying person is a member of an unincorporated partnership or any other partner of the same partnership and

The term “related party” refers to a Related Party of any of the above.

What Are the Compliance Obligations?

Transfer Pricing rules usually shift the burden of proof (burden of evidence) on the taxpayer. It is the responsibility of any taxpayer who has intercompany transactions that have more than a certain threshold, in the applicable tax year, to create documents for Transfer Pricing and demonstrate that the intercompany transactions were conducted at “arm’s length”.

The value of intercompany transactions has yet to be defined and is anticipated to be clarified following the implementation of UAE Corporate Tax Legislation. This Consultation Paper specifies the mandatory Transfer Pricing documentation consisting of a local file and a Master File (according to the formats and content required in OECD BEPS’s Action 13 and by the World’s Best practices).

Additionally, the arm’s-length nature of the transactions must be confirmed using one of the internationally recognized Transfer Pricing methods or another approach when the business can prove that the method specified can’t be used reasonably.

If the requirements are met, companies must complete and submit the Transfer Pricing disclosure form with details about their transactions with inter-company entities. It needs to be clarified how this Transfer Pricing disclosure form must be filed simultaneously with your tax returns (i.e., in the first (9) months from the expiration of the applicable period of tax) or with an earlier date.