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NRI businesses in the United Arab Emirates remain optimistic about the growth of business transactions between India and the UAE, even as the Gulf state introduces a new corporate tax after June 1 this year, financial experts said.
According to these experts, NRIs and Indian residents doing business in the UAE also stated that the tax is a significant relief from the uncertainty of utilizing double taxation avoidance schemes and guarantees of income taxation in India on their foreign income.
Dr Sahitya Chaturvedi, a Chartered Accountant and Convenor of the Retail Focus Group at the Indian Business and Professionals Council, said: “Taxation is a move towards the globalization of businesses in the Gulf countries and the UAE has the lowest corporate income tax rate in the country. The standard tax rate in the GCC region is 9%.” ”The UAE CT regime is designed to incorporate global best practices and minimize the compliance burden on businesses,” he said. Institute of Chartered Accountants of India (ICAI) Dubai Chapter Chairman CA Harikishan Rankawat said the decision to provide tax breaks to companies with a revenue base below or equal to AED 3 million is a welcome relief measure reflecting farsighted and pro-UAE business leadership.” Under the new Article 73 Ministerial Decision No. 3 million income threshold will apply for tax periods beginning on or after 1 June 2023 and will only continue to apply for subsequent tax periods ending before or after 31 December 2026,” He said.
According to Rankwat, even a business with a net profit of more than Dh375,000 but a revenue of less than Dh3 million can seek small business relief, thereby exempting the corporate tax. “Although small businesses are offered tax breaks, they must register for UAE corporate tax and file tax returns within nine months of the end of their accounting period,” he said.
From the perspective of the textile industry, Chandrashekhar Bhatia of the Global Business Confederation said the impact would not be adverse as the textile industry is a big industry and 9% would not be a major burden. ”Every developing country that wants to extend facilities to businesses and people needs to levy the tax. So, this is for the greater good of the business ecosystem and economic development,” Bhatia told PTI.
Janak Panjuani, director of Puthran Chartered Accountants, said that with regard to the management remuneration paid to the board of directors, under Section 171 of the Business Companies Act, the safe harbor clause may be 10% of the net profit from a transfer pricing perspective. With regard to the deduction of interest on lease liabilities and depreciation of right-of-use assets, he said interest on lease liabilities does not meet the definition of interest under corporate tax law. ”A further Article 20, paragraph 7, states that if there is a conflict between the provisions of the Corporate Tax Act and the applicable accounting standards, the provisions of the Corporate Tax Act shall prevail. So, as things stand, subject to any decision of the Cabinet in this regard, it is proposed to disregard the accounting under IFRS 16 where depreciation of the leased property by the lessor should be allowed as a deduction in computing taxable income,” Panjuani said. In such cases, a deduction for the rent paid should be allowed when computing taxable income,” he said.
(This story was not edited by Devdiscourse staff and was automatically generated from a syndicate feed.)
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