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Even with the introduction of a new corporate tax in the United Arab Emirates after June 1 this year, NRI businesses in the Gulf countries remain optimistic about the growth of business transactions between India and the UAE.
According to experts, NRIs and Indian residents doing business in the UAE also say the tax is a major relief from the uncertainty of taking advantage of double taxation avoidance schemes and securing India’s income taxation on their foreign income.
Dr Sahitya Chaturvedi, Chartered Accountant and Convenor of the Retail Focus Group at the Indian Business and Professionals Council, said: “Taxation is a move towards globalization of businesses in the Gulf countries, and the UAE has the lowest corporate income tax rate in the GCC region at a standard rate of 9%. “
“The UAE CT regime is designed to incorporate global best practice and minimize the compliance burden on businesses,” he said.
CA Harikishan Rankawat, Chairman of the Dubai Chapter of the Institute of Chartered Accountants of India (ICAI), said the decision to provide tax relief to companies with a revenue base below or equal to AED 3 million is a welcome relief measure reflecting forward-looking and pro-UAE business leadership.
“Under the new Ministerial Decision No. 73, the AED 3 million income threshold will apply for tax periods beginning on or after 1 June 2023 and will continue to apply only for tax periods ending before or after 31 December 2026 subsequent tax periods,” 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. “Despite tax breaks being offered to small businesses, 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 expand facilities to businesses and people needs to levy taxes. 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.
“Further Article 20, paragraph 7, provides that in the event of conflict between the provisions of the Corporation Tax Act and the applicable accounting standards, the provisions of the Corporation Tax Act shall prevail. Therefore, as things stand, subject to any decision by the Cabinet in this regard decision, proposing to disregard the accounting of IFRS 16, if the depreciation of the leased asset by the lessor should be allowed as a deduction when computing taxable income,” Panjuani said.
As far as lessees are concerned, a deduction for rent paid should be allowed when calculating taxable income, he said.
(according to PTI input)
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