Tag: Ministerial Decision
UAE Corporate tax relief for small businesses in United Arab Emirates
The Ministry of Finance has taken a significant step towards supporting small businesses in the UAE with Ministerial Decision No. 73 of 2023 on Small Business Relief for Corporate Tax.
Small Business Relief aims to ease the burden on startups, small, and micro-enterprises by reducing their Corporate Tax and compliance costs. The decision outlines the revenue threshold and conditions for eligible businesses to avail the relief and also clarifies provisions related to carried forward Tax Losses and disallowed Net Interest Expenditure under this scheme.
Here’s what you need to know about Small Business Relief:
Eligibility and Revenue Thresholds
The Ministerial Decision establishes that businesses and individuals that generate an annual revenue below AED3 million will qualify for the small business relief exemption. The relief will be available for financial years beginning on or after 1 June 2023 until 31 December 2026. This applies if their revenue in the relevant tax period and previous tax periods is below AED3 million for each such tax period. Once the revenue threshold is exceeded, the small business relief will no longer be available.
Businesses that are eligible for relief but do not elect to apply for it will have the option to carry forward incurred tax losses and can disallow net interest expenditure from such tax periods. The Ministerial Decision expands on the relief already contained in the Corporate Tax Law, which applies to businesses with annual profits of less than AED375,000. Where this relief is applied, there is also no ability to carry forward losses.
Effective Period
The AED 3 million revenue threshold will apply to tax periods starting from 1st June 2023 and will continue until tax periods ending on or before 31st December 2026. In addition to meeting the above-mentioned threshold, other conditions must be fulfilled in order to be eligible for small business relief.
Exclusions
Small Business Relief won’t be available for Qualifying Free Zone Persons or members of Multinational Enterprises Groups (MNE Groups) with consolidated group revenues exceeding AED 3.15 billion.
Tax Losses and Net Interest Expenditure: Businesses not opting for Small Business Relief in specific tax periods can carry forward any incurred Tax Losses and disallowed Net Interest Expenditure for use in future tax periods without the relief.
Businesses Precluded
Small business relief is solely available to UAE entities who are a Resident Person and are not one of the following:
- a constituent company of a multinational enterprises group (groups of companies with operations in more than one country with a consolidated revenue exceeding AED3.15 billion); and
- a qualifying free zone person, (i.e. a legal person incorporated, established, or otherwise registered in a free zone).
Anti-Abuse Rules
The decision warns against artificial separation of business activities to claim Small Business Relief while exceeding the revenue threshold. Such arrangements may fall under the general anti-abuse rules of the Corporate Tax Law. Where a taxable person who has artificially separated their business, or business activity and the total revenue exceeds AED3 million in any tax period, and such person has elected to apply for small business relief, this would be considered an arrangement to obtain a corporate tax advantage under Clause (1) of Article 50 regarding the general anti-abuse rules of the Corporate Tax Law and may be set aside.
Burden is on the Business
Regardless of whether the relief is claimed, small business entities may be under an obligation to register for and file corporate tax returns. However, there may be a relaxation of filing and registration requirements for small businesses under rules that are still awaited.
Conclusion
If your business is a mainland business or incorporated in the UAE or if you are a person that operates a business in the UAE, you may be eligible for small business relief, provided that your revenue in the relevant tax period does not exceed AED 3 million.
As UAE’s corporate tax regime are still new, we look forward to seeing additional decisions clarifying the provisions of the Corporate Tax Law, such as those relating to qualifying income.
If you have any questions regarding the UAE corporate tax regime or its application to your business, please get in touch with your usual Reed Smith contact or one of the authors. We would be happy to assist you in determining whether corporate tax will apply to your business and what the next steps are to ensuring compliance.
Supporting the growth of small businesses is crucial for the UAE’s economy, and the Small Business Relief paves the way for a promising future for these enterprises.
Why is Alliance Prime the best Tax Consultancy in Dubai?
Alliance Prime is a leading provider of auditing, accounting, taxation, and advisory services in the UAE. Our expert team will guide you through the complex laws and regulations of UAE, including Corporate Tax, VAT, Excise Tax, Accounting and Bookkeeping, ESR, Financial Advisory, ERP, etc. We stay up-to-date with the latest changes in laws and regulations in the UAE. If you’re looking for reliable and professional auditing, accounting, taxation, and advisory services in the UAE, look no further than Alliance Prime.
For any Corporate Tax or related enquiry, visit localhost/alliance-acc/ or contact us at- +971 58 825 7795 or Email us at:- contact@alliance-acc.com
A Quick Guide to Corporate Tax Registration in the UAE
FTA has invited all taxpayers in the state to register for corporate tax.
FTA has invited all taxpayers in the state to register for corporate tax.
Eligibility for Early Registration
Currently the registration is open for Public Joint Stock Companies ‘PJSC’, Private Shareholder Companies ‘PSC’, and other private entities such as Limited Liability Company “LLC”. Registration is required for all legal entities except those are Exempt Persons, unless insofar Exempt Persons conduct a Business or a Business Activity. Non-resident companies such as a Branch of a foreign company, and Sole Establishment should not register for now, but wait for further clarification from the FTA.
Distinction from VAT Registration
The UAE Corporate Tax ‘CT’ registration is a separate process from VAT registration. Companies registered for VAT should also register for Corporate Tax ‘CT’, and receive their Tax Registration Number “TRN”, which is unique per each Taxpayer.
CT Registration Assistance
Companies that are invited for early registration should follow the FTA’s guidelines for the registration process, and we would be glad to help you throughout the registration process. As an FTA Approved Tax Agent, Alliance Prime is a leading provider of auditing, accounting, taxation, and advisory services in the UAE. Our team’s experts will guide you through the complex laws and regulations of the UAE, including the Corporate Tax Registration process.
Why is Alliance Prime the best Tax Consultancy in Dubai?
Alliance Prime is a leading provider of auditing, accounting, taxation, and advisory services in the UAE. Our expert team will guide you through the complex laws and regulations of UAE, including Corporate Tax, VAT, Excise Tax, Accounting and Bookkeeping, ESR, Financial Advisory, ERP, etc. We stay up-to-date with the latest changes in laws and regulations in the UAE. If you’re looking for reliable and professional auditing, accounting, taxation, and advisory services in the UAE, look no further than Alliance Prime.
For any Corporate Tax or related enquiry, visit localhost/alliance-acc/ or contact us at- +971 58 825 7795 or Email us at:- contact@alliance-acc.com
Ministerial Decision No (120) of 2023 on Transitional Rules for Corporate Tax.
UAE Corporate Tax Update📣
The Ministry of Finance UAE has issued Ministerial Decision No (120) of 2023 on Transitional Rules for Corporate Tax.
The decision includes adjustments for the opening balance sheet under the Corporate Tax Law and offers significant clarifications for businesses to transition smoothly before and after the enactment of the Law.
The decision applies to certain assets and liabilities held by businesses before the Corporate Tax Law comes into effect, such as:
- Immovable property
- Financial assets
When filing their initial Tax Return, businesses have the opportunity to make adjustments to the tax treatment of their assets and liabilities, in accordance with specific regulations. It is crucial for businesses to carefully consider and determine the approach they wish to take in this regard.
Under normal circumstances, their decision would be considered permanent. However, it is important to note that there may be certain exceptional situations or specific conditions where this permanence could be subject to change or reconsideration. These special circumstances would require additional evaluation or consideration before any adjustments or alterations to the initial decision are made.
There is further flexibility for the real estate sector
Companies with immovable property recorded on a historical cost basis, before the Corporate Tax comes into effect, can select the basis of the relief, using either:
✅ a time apportionment method; or
✅ valuation method
For details, refer the detailed copy of the Ministerial Decision here: https://mof.gov.ae/tax-legislation/
Why is Alliance Prime the best Tax Consultancy in Dubai?
Alliance Prime is a leading provider of auditing, accounting, taxation, and advisory services in the UAE. Our expert team will guide you through the complex laws and regulations of UAE, including Corporate Tax, VAT, Excise Tax, Accounting and Bookkeeping, ESR, Financial Advisory, ERP, etc. We stay up-to-date with the latest changes in laws and regulations in the UAE. If you’re looking for reliable and professional auditing, accounting, taxation, and advisory services in the UAE, look no further than Alliance Prime.
For any Corporate Tax or related enquiry, visit localhost/alliance-acc/ or contact us at- +971 58 825 7795 or Email us at:- contact@alliance-acc.com
Federal Tax Authority board reviews corporate tax implementation progress
Federal Tax Authority to launch 4 ‘transformative’ projects to boost country’s competitiveness.
As the UAE’s Federal Tax Authority gears up to introduce corporate tax this year, the board has given approval to the 2022 financial statement, while also reviewing the development plans and performance indicators. As per Dubai Government Media Office, during the second meeting this year, the board was also informed about updates regarding the Federal Decree Law on the Taxation of Corporations and Businesses, as well as the FTA’s readiness and procedures leading up to its implementation.
During the meeting, which was presided over by Sheikh Maktoum bin Mohammed, Deputy Ruler of Dubai, Deputy Prime Minister, Minister of Finance, and FTA board chairman, the attendees were also updated on the collaboration between the Ministry of Finance and the FTA to ensure the smooth implementation of policies and decisions related to the new corporate tax law, according to the statement.
The introduction of this law aims to enhance the UAE’s global position as a prime destination for business and investment that complies with the highest international standards of tax transparency.
Last year, the UAE implemented a federal corporate tax law with a standard statutory rate of 9% that will become applicable for businesses commencing their financial year from June 1st onwards.
In December, the country passed the federal corporate tax law, which included companies earning more than Dh375,000 in the scope of the corporate tax category.
The board was also briefed about the progress the FTA has made in terms of its “transformational projects”, aimed at enhancing the country’s competitiveness.
According to the Media Office, the Federal Tax Authority is currently executing several significant projects, including the Muwafaq initiative aimed at enhancing ease of doing business and tax compliance within the small and medium-sized enterprises sector, the introduction of a Specialised Tax Agent, implementation of the Electronic Invoicing System, and the corporate tax system.
During its meeting, chaired by Sheikh Maktoum, the FTA Board of Directors reviewed the progress made in implementing the integrated tax system, as well as the results of the successful launch of the FTA’s advanced integrated digital tax services platform, EmaraTax.
The platform was activated in December 2022, with all services now available for taxpayers.
A comprehensive report reviewed by the FTA Board of Directors on the achievements, results, and developments of the Authority’s existing projects reveals that the number of registrants for Value Added Tax (VAT) has reached 351,514, while there are 1,549 registrants for Excise Tax, and 467 Tax Agents.
The report also outlines key statistics regarding VAT and Excise Tax, periodic returns, the payment of taxes, and refund requests that have been processed.
According to the report, the Federal Tax Authority has approved new applications from citizens requesting refunds on the tax they incurred for building their new homes, worth more than AED131m in February and March 2023, a growth of 13.92 per cent from last year.
This is a direct result of the seamless procedures implemented by the FTA to enable citizens to recover the tax incurred on building their new homes.
Why is Alliance Prime the best Tax Consultancy in Dubai?
Alliance Prime is a leading provider of auditing, accounting, taxation, and advisory services in the UAE. Our expert team will guide you through the complex laws and regulations of UAE, including Corporate Tax, VAT, Excise Tax, Accounting and Bookkeeping, ESR, Financial Advisory, ERP, etc. We stay up-to-date with the latest changes in laws and regulations in the UAE. If you’re looking for reliable and professional auditing, accounting, taxation, and advisory services in the UAE, look no further than Alliance Prime.
For any Corporate Tax, enquiry contact us at- +971 58 825 7795 or Email us at:- contact@alliance-acc.com
UAE Corporate Tax: Conditions for Change in Tax Period
Conditions for Change in Tax Period for the Purposes of Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses.
For the purposes of Article 58 of Federal Decree-Law No. 47 of 2022 referred to above, the Taxable Person can make an application to the Authority to change the start and end date of the Tax Period, or use a different Tax Period, where the following conditions are met:
- The change is for one of the following reasons:
-
- The Taxable Person’s liquidation
- Aligning the Resident Taxable Person’s Financial Year with the Financial Year of another Resident Person for the purpose of forming a Tax Group or joining an existing Tax Group, or aligning the Taxable Person’s Financial Year with the Financial Year of its domestic or foreign head office, subsidiary, parent, or ultimate parent company, for the purpose of financial reporting, or to benefit from a tax relief available under the Federal Decree-Law No. 47 of 2022 referred to above or under the legislation of a foreign jurisdiction (or)
- There is valid commercial, economic, or legal reason to change the Tax Period.
- The Taxable Person has not yet filed the Tax Return for the Tax Period he is applying to change.
- The application for change in Tax Period is in respect of any of following:
- Extend the current Tax Period to be a maximum of 18 months; or
- Shorten the next Tax Period to be between 6 and 12 months.
- The application shall be made before the lapse of 6 months from the end of the original Tax Period.
- Where the Taxable Person filed an application to shorten a Tax Period, the application shall not be in respect of a prior or current Tax Period.
Any provisions contrary to or inconsistent with the provisions of this Decision shall be abrogated. Implementation of the Decision shall be published in the Official Gazette and shall come into effect as of 1 June 2023. All Cabinet Decisions and Ministerial Decisions issued relating to the Corporate Tax Law are available on the Ministry of Finance’s website: www.mof.gov.ae.
Why is Alliance Prime the best Tax Consultancy in Dubai?
Alliance Prime is a leading provider of auditing, accounting, taxation, and advisory services in the UAE. Our expert team will guide you through the complex laws and regulations of UAE, including Corporate Tax, VAT, Excise Tax, Accounting and Bookkeeping, ESR, Financial Advisory, ERP, etc. We stay up-to-date with the latest changes in laws and regulations in UAE. If you’re looking for reliable and professional auditing, accounting, taxation, and advisory services in the UAE, look no further than Alliance Prime.
For any Corporate Tax, enquiry contact us at- +971 58 825 7795 or Email us at:- contact@alliance-acc.com
UAE CT Update: Corporate Tax Exemption for Public and Community Welfare Entities
Entities eligible for exemption are those that prioritize philanthropy, community services, and corporate social responsibility initiatives
The UAE Ministry of Finance (MoF) said public benefit entities that contribute to the welfare of society are eligible for tax exemptions under the country’s corporate tax law.
“The MoF unveiled a UAE Cabinet new implementing decision relating to qualifying public benefit entities for the purposes of the corporate tax law, which is designed to ensure that entities existing and operating for the wider public benefit are eligible for tax exemption,” the ministry of finance said in a tweet.
The tax exemption is designed to reflect these entities’ important role in the country, which often includes religious, charitable, scientific, educational or cultural value. The UAE said to qualify for the exemption, eligible entities must meet the conditions specified in Article 9 of the corporate tax law and must maintain compliance with all relevant federal and local laws.
The ministry called on all qualifying public benefit entities to register with the UAE Federal Tax Authority and obtain a tax registration number for corporate tax purposes.
The MoF unveiled a UAE Cabinet new implementing decision relating to Qualifying Public Benefit Entities for the purposes of the Corporate Tax Law, which is designed to ensure that entities existing and operating for the wider public benefit are eligible for tax exemption.#UAECT pic.twitter.com/e0fYR1LbOt
— وزارة المالية | الإمارات (@MOFUAE) April 23, 2023
The entities must also inform the ministry of any changes that may affect their status as qualifying public benefit entity.
In addition, various reporting obligations apply to Qualifying Public Benefit Entities, principally to check that they continue to meet the criteria for approval.
This Cabinet Decision also provides further certainty and transparency for taxpayers in relation to their deductible expenditure under Article 33 of the Corporate Tax Law, as donations and gifts will be allowed as deductible expenditure for Corporate Tax purposes if they are made to a Qualifying Public Benefit Entity listed in the Cabinet Decision.
Earlier, the Ministry announced corporate tax exemptions for non-resident persons, government entities, government-controlled entities, as well as extractive businesses and non-extractive natural resource businesses.
For any Corporate Tax, enquiry contact us at- +971 58 825 7795 or Email us at:- contact@alliance-acc.com
Source: https://mof.gov.ae/