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DUBAI, April 29 (PTI) NRI businesses in the United Arab Emirates remain optimistic about the growth of business transactions between India and the UAE even after 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.
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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 the globalization of businesses in the Gulf countries and the UAE has the lowest corporate income tax rate in the GCC. The standard tax rate in the region is 9%.”
“The UAE CT regime is designed to incorporate global best practice and minimize the compliance burden on businesses,” he said.
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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(7) states that in case 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 Cabinet in this regard The decision, under IFRS 16, proposes to disregard the accounting if the lessor’s depreciation of the leased asset should be allowed as a deduction when computing taxable income,” Panjuani said.
In the case of lessees, a deduction for the rent paid should be allowed when computing taxable income,” he said.
(This is an unedited and auto-generated story from a Syndicated News feed, the content body may not have been modified or edited by LatestLY staff)
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