The final Law Update of 2022 is here, and it’s packed full of articles. The double edition features two focus areas, first is a spotlight on Energy and Resources and second we feature a collection of articles on Transport and Logistics. The developments occurring in these sectors in the MENA region are unprecedented and our lawyers cover vast themes for you.
The Energy and Resources focus features topics such as diversifying energy resources, solar PV, mining in the Middle East, renewable energy and green hydrogen. From a transport perspective, we draw attention to the Bahrain metro project, discuss the challenges and remedies associated with the repossession of an aircraft, and there is advice on what to consider should a party vary the terms of a shipping contract.
This edition navigates you through updates from across jurisdictions such as, Oman, Jordan, Saudi Arabia, Egypt, Iraq, Qatar, and the UAE. Each article is timely and provides insights into legal issues and cases that are affecting these sectors across the region.Read the full edition
The Ministry of Finance in the UAE has now published the much-awaited Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses (CT Law). The issuance of the CT Law follows the Ministry’s announcement on the introduction of Federal corporate tax in the UAE earlier this year.
The Corporate Tax Law will apply to financial years commencing on or after 1 June 2023.
The key features of the CT Law are as follows:
Scope: Corporate tax (CT) will apply to:
Exempted persons: Persons that are exempt from CT include government entities, government-controlled entities, businesses engaged in the extraction of natural resources, non-extractive natural resource businesses, qualifying public benefit entities, public pension or social security funds, and qualifying investment funds. The CT Law prescribes conditions that are required to be satisfied in order for the exemptions to apply.
Free zones: Qualifying free zone persons will be subject to 0% CT on qualifying income and 9% CT on non-qualifying income. The CT Law prescribes conditions that free zone entities must satisfy in order to be treated as qualifying free zone persons.
Exempt income: Subject to certain conditions stipulated in the CT Law, exempted income includes dividends and profit distributions received from a UAE legal entity, dividends and profit distributions received from a participating interest (i.e., more than 5% ownership interest) in a foreign legal entity, other income from a participating interest, income of a foreign permanent establishment, income derived by a foreign business from operating aircraft or ships in international transportation.
Restructuring relief: Subject to prescribed conditions being satisfied, CT relief (no gain no loss) is provided to business transfers within a qualifying group and business restructuring.
Withholding tax: Domestic and cross border payments will be subject to a prevailing withholding tax rate of 0% in the UAE.
Foreign tax credits: Foreign tax credits will be available for taxation incurred by UAE businesses on income earned outside the UAE.
Transfer pricing (TP): The CT Law establishes rules for determining arm’s length standard and sets out definitions for “related parties”, “control” and “connected persons”.
Tax Group: The CT Law prescribes detailed conditions for the formation of tax groups, determination of the group’s taxable income and tax losses.
Tax registration: All taxable persons are required to register for CT in the form, manner and timeline that will be prescribed by the Minister.
Tax return filing and payment: Within nine (9) months from the end of the financial period, taxable persons are required to file their CT return and settle the CT payable. Certain exempted persons may still be required to file CT returns.
Record-keeping: CT-related records and documentation are required to be maintained for seven (7) years from the end of the tax period to which they relate.
The publication of the CT Law in the UAE represents a radical change to the UAE tax landscape which affects all business in the UAE (including free zone entities, family businesses and individuals conducting business in the UAE) and foreign businesses with a presence in the UAE. It is crucial for all businesses to understand the CT rules and assess its implications in order to be compliant and ensure tax efficiency.
We will be holding webinars and workshops on the CT Law shortly.
Our multiple award-winning Tax team is here to help. With their expertise and significant experience of CT matters across the Middle East and all industry sectors, they are well placed to assess the impact of CT on your organisation and assist with your CT requirements in the UAE.
Please click here to access our wider tax offering.