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The new corporate tax law will bring transparency and more sustainable investment at home, as businesses will now also be more cautious in their investment plans
Analysts and tax experts say businesses need not panic as they still have time to prepare for a corporate tax regime that will take effect on June 1, 2023.
The UAE on Friday issued Federal Decree No. 47 of 2022 on corporate and corporate taxation. This means that businesses with a profit of more than Dh375,000 per annum will pay a 9% tax.
“Companies have enough time to assess the tax implications and prepare for the corporate tax regime. They should not panic about immediate implementation. A strategic and thoughtful approach will help optimize the tax implications,” said Pankaj S Jain, Managing Director, AskPankaj Tax Advisors Say.
Companies now need to prepare adequate, separate financial statements for each entity to comply with tax regulations, Jain added. “Expenses incurred fully and exclusively for business purposes need to be proven. Henceforth, the accounting function of companies will need to be centralized and thorough,” he added.
Naveen Sharma, Hon. The director of cultural events at the Indian Club and former president of the Dubai chapter of the Institute of Chartered Accountants of India (ICAI) noted that the corporate tax, one of the lowest in the world, will help the country build a new revenue stream instead of relying on oil and corporate dividends.
“Now is the time for companies to assess their financial position under corporate tax law, especially groups with multiple entities. The group concept will be different from VAT law as we know it, and therefore, the provisions of transfer pricing will apply. This will need to be properly understood Intercompany transactions and their impact under the new law,” Sharma said.
“The new corporate tax regime is designed around international best practice and will help the UAE strengthen its position as a global hub for investment and business,” said the former chairman of ICAI.
Nimish Goel, partner at WTS Dhruva Consultants, described it as a fairly comprehensive piece of legislation that incorporated some of the proposals that the finance ministry had invited for its public consultation paper.
“An important element is the anti-avoidance provision, designed to deter potential tax abuse. A welcome deviation from the PCD is to not allow interest to be carried forward over 10 years. This should benefit highly leveraged companies , usually real estate and infrastructure companies,” he said.
flipping time
Shailesh Khandelwal Partner – Shailesh Khandelwal and Co. believes that now is the time for businesses to start reviewing their existing accounting and bookkeeping systems and make the necessary changes to bring their systems in compliance with the requirements set out in this Act.
“Businesses will also have to revisit existing contracts with customers and, if necessary, make the necessary amendments to factor the corporate tax burden into profit margins. Otherwise, they may have to incur losses due to lower profit margins due to corporate tax,” He says.
Vikas Panchal, managing director of Tally Solutions Middle East, said the government’s decision to maintain the zero-threshold level for taxable profits below AED375,000 is a tribute to the role of start-ups and SMEs in the UAE economy. important role recognition.
“The standard tax rate of 9% ensures that the UAE’s corporate tax regime is the most competitive in the world. This will further strengthen the country’s position as a global business and financial hub,” Panchal added.
He added that following the introduction of VAT in 2018, most SMEs have adapted to the digital transformation which will ensure a seamless transition to this new tax implementation.
Chirag Agarwal, managing partner of Earningo Accounting and Tax Consultancy, said the new tax regime would bring transparency and curb unethical tax practices.
“The fact that economic free zones are eligible to benefit from a zero corporate tax rate demonstrates the continuous efforts of the UAE government to promote the business ecosystem in the region. It is worth noting that arm’s length prices and transfer pricing documents are eligible for free zone persons key conditions in order to take advantage of the zero tax rate on qualifying income,” he said.
Farhat Ali Khan, managing partner of Century Maxim International, said the new mandate presents an opportunity for businesses to establish a robust legal framework that demonstrates transparency and accountability to internal and external stakeholders. “Through taxation, companies can implement appropriate fiscal policies that directly or indirectly support the UAE’s global goals under the United Nations Sustainable Development Goals (SDGs).”
Vijay Valecha, chief investment officer at Century Financial, said the new law would bring the UAE into line with international rules and reduce concerns that companies based in the UAE have an unfair advantage because they pay no taxes, allowing them to keep all their earnings.
“Ironically, this will benefit the companies operating here because they will not be under suspicion. Businesses will also be more cautious now because the tax will force them to be more diligent in their investment plans. This will promote a more sustainable domestic investment,” Valecha added.
Copyright © 2022 Khaleej Times. all rights reserved. Courtesy of SyndiGate Media Inc. (Syndicate Information).
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