Experts review various aspects of UAE corporate taxation – News

Law will come into force on June 1, 2023

Guest speakers at the event. – Photos provided

With the imminent introduction of corporate tax (CT) in the UAE, there are some questions on the minds of businesses and professionals alike. On 13th April, IBPC, Indian Club and Tax Society jointly organized an event at the India cub which was attended by more than 200 businessmen, professionals and others.

Naveen Sharma, Director of Cultural Events and Chairman of the Tax Institute, emphasized that now is the time for businesses to examine the readiness of their books and IT systems. While the tax laws are straightforward, compliance and documentation are critical.

Dilip Jain spoke at IAS 12 while panelists Pavithra Balaji, Girish Chand and Shailesh Kumar answered tax questions, moderated by Nimish Makvana of Crowe UAE, Co-Founder and Senior Partner, Taxation Society.

Girish Chand said the Small Business Relief (SBR) is a welcome measure through which the SME sector can benefit from reduced corporate tax compliance. Maintaining proper books of accounts is a key requirement to utilize SBR. An entity needs to assess its financial position before selecting an SBR, taking into account future profitability and leverage.

Pavithra Balaji replied that all free zone companies are required to register and file a CT return. The free trade agreement has clarified that the corporate tax treatment of free zone companies will be the same. They need to keep proper accounting records and need to comply with transfer pricing rules and documentation, similar to mainland companies. The relief provided is a tax rate, with free zone companies enjoying zero tax rate on qualifying income provided certain conditions are met.

Dilip Jain mentioned that entities will need to revisit their accounting systems and change the chart of accounts to comply with corporate tax laws. The accounting system should also be able to generate reports related to corporate taxation. International Accounting Standard (IAS) 12 – Income Taxes provides the necessary guidance on the accounting for current and deferred taxation and the related presentation and disclosure in the financial statements.

Shailesh Kumar on the permissibility of director/shareholder remuneration stated that any payment/benefit provided to a director or shareholder needs to correspond to the “market value” of the person’s services to the company and should be used solely and exclusively for the business. There are currently no specific rules for determining the “market price”, which will depend on the experience, qualifications, importance and contribution to the company of the directors/shareholders. Other topics discussed included tax residency/place of effective management of foreign companies, taxability of rental income and dividends received from UAE companies.

Nimish Makvana said the UAE corporate tax law, effective from 1 June 2023, along with a sound regulatory framework and compliance will bring governance and transparency, ultimately attracting foreign direct investment flows. “We have witnessed how the UAE economy has evolved as it reformed and attracted global businesses. Given the various regulations and laws being implemented, business leaders need to ensure compliance with the law and the expectations of regulators. In the current economic climate, the UAE leadership is Its strong position on the global map makes the UAE a destination of choice for business leaders,” he said.