||Definitions & General provisions
Several definitions have been provided, which shall aide in reading / interpreting the subsequent articles of the Corporate Tax Law.
An important aspect to note that the definitions itself have attempted to segregate treatment of persons/ businesses established in one of the Free Zone by defining ‘Free Zone Person’ and ‘Qualifying Income’.
||Imposition of Corporate Tax and Applicable rates
||While the Corporate Tax rates for UAE based businesses either in Mainland and/or Free Zone have been published but the Corporate Tax rates applicable to businesses exposed to OECD Pillar 2.0 are yet to be published.
||In line with the public consultation paper, several Persons / Businesses / activities have been identified as operating exempted business along with key conditions for the exemption to apply.
||Taxable Person and Corporate Tax Base
||Various categories of Taxable Persons have been clarified including and not limited to residents, non-residents, qualifications of Permanent Establishment, Partnerships, Family foundations etc.
||Free Zone provisions
||Businesses established in certain Free Zones are expected to be exempted from CT. However, the further nuances shall be clarified by way of Cabinet Decisions; especially on the aspect if a Free Zone business is carrying out activities in the UAE Mainland and/or deriving income from the UAE Mainland
||Calculation of Taxable Income
||Guidance for arriving at Taxable Income has been provided in greater detail
||Clarification on what income should be considered for exemption along with qualifying conditions has been laid out including that of certain key sectors such as shipping, aviation, and related activities
||Reliefs for Qualifying groups and Business Restructuring
||Guidance on how losses can be transferred within a Corporate Tax Group along with conditions thereof and relaxations from computing gain or loss on business restructurings has been clarified
||Detailed listing has been provided for deductible and non-deductible expenses along with the conditions / restrictions there on.
||Related Party Transactions
||Guidance on how the transactions with related party/ connected person has to be treated and valued has been provided in much detail including determining the methods on the basis of which arm’s length value shall be computed
||Tax Loss reliefs, transfer and limitations
||Much guidance has been provided on eligibility / conditions to carry forward, transfer and/or lapse of tax losses
||Tax Group provisions
||Detailed guidance on eligibility to form or restriction not to form Corporate Tax Group has been provided
||Calculation of Corporate Tax Payable and guidance on Withholding Taxes, Foreign Tax Credit
Following further deductions are allowed while final payment of Corporate Tax liability for a particular tax period:
- Withholding Tax
- Foreign Tax Credit
- Any other credits and/or relief as may be defined
||Payment and refund of Corporate Tax
||Payment of Corporate Tax liability has to be made within 9 months from the end of the relevant tax period with no requirement of provisional and/or advance payment of Corporate Tax liability. Further, if there is excess Withholding Tax liability then the same can be claimed as refund subject to the applicable procedures.
||Anti- Abuse Rules
||It has been clarified that typically Corporate Tax planning considerations shall not be the only consideration to drive a transaction but should have valid commercial reason/ economic reality. Transactions structured with the only intention to reap benefits/ reliefs of Corporate Tax could be questioned
||Tax Registration and Deregistration
||Enabling Articles related registration and de-registration has been provided. Procedures for the same could be provided by way of Cabinet decisions.
||Tax Returns and Clarifications
||Enabling Article related return filing requirements has been provided along with certain key details that have to be submitted along with the returns. It appears that audited / certified financial statements and transfer pricing documentation may be required to be filed; however, whether such financial statements and transfer pricing documentation is required to be filed along with the Corporate Tax returns remains to be expressly clarified.
||Assessments and penalties
||Enabling Articles regarding conducting periodic Corporate Tax assessment has been provided along with powers to levy penalties in case of violations
||It appears that there is no need to recast previous year’s financial statements, which shall be the opening balance sheet for tax period reporting subject to considerations around transfer pricing
||Specific Articles for sharing of revenue between Federal and Local government, regard to international agreements i.e., double tax treaties and repealing of conflicting provisions have published