Post the release of the Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses (the “Corporate Tax Law”), the UAE Ministry of Finance (‘MOF’) / Federal Tax Authority (‘FTA’) has initiated issuing further guidance on the provisions of the Corporate Tax (‘CT’)Law.

On clarificatory note, the MOF has issued today Ministerial Decision No. 43 of 2023concerning exceptions from tax registration for the purpose of the CT Law.

The decision is issued in accordance with Article 51 of the CT Law, which requires taxable persons to register for CTLaw with the FTA, except the following persons:

  1. A Government Entity.
  2. A Government Controlled Entity.
  3. A Person engaged in an Extractive Business that meets the conditions of Article 7 of the CT Law.
  4. A Person engaged in a Non-Extractive Natural Resource Business, that meets the conditions of Article 8 of the CT Law.
  5. A Non-Resident Person that derives only State Sourced Income under Article 13 of CT Law and that does not have a Permanent Establishment (‘PE’) in the State according to the provisions of the CT Law.

It is important to note that if such exempt entities [as mentioned at sr.no. (a) to (d)] are carrying out any taxable business activity subject to UAE CT Law, then they would be required to register for the UAE CTLaw.

Further, the examination of PE for Non-Residents becomes of paramount importance, as the taxability of such Non-Residents and the requirement to register for the CT Law depends on whether they constitute a PE in the UAE or not.

It also implies that till the time withholding tax provisions are introduced in the CT Law, income derived by the Non-Residents (from UAE resident payer entities) without constituting a PE in the UAE (such as royalties, fees for management services, interest, dividend, etc.) may not be subject to CTand such non-residents may not need to worry about CTregistration and compliances.

How can PKF help?

PKF UAE is a leading firm that provides professional financial advisory, assurance, VAT, Corporate Tax, ESR and International tax services in the UAE. PKF UAE brings world-class capabilities and high-quality service to clients helping them to align their working model to government reporting and compliance requirements.

With the fast-pacedongoing developments in the UAE CT regime, it is important for businesses in the UAE to understand the CT provisions, assess the impact of CT Law,decide the appropriate way forward compliant with the CT regulations, get the IT systems ready, understand Transfer Pricing (‘TP’) implications including benchmarking&policies and ensuring timely CT and TP compliances.

PKF UAE can assist in providing such services, undertaking Corporate Tax and Transfer Pricing impact assessment, analysing relevant implications and providing assistance in Corporate Tax and Transfer Pricingcompliances.

Contacts

You may email us or can contact any of our team members relating to your queries on this subject:

Stany Pereira
Managing Partner
stany@pkfuae.com
Shailesh Kumar
Director- Tax Services
skumar@pkfuae.com
Mradul Gupta
Senior Manager
mgupta@pkfuae.com
Nandita Salgaonkar
Manager – Tax Services
nsalgaonkar@pkfuae.com
Radhika Doshi
Assistant Manager –  Tax Services
rdoshi@pkfuae.com
Jaya Agarwal
Tax Senior- Tax Services
jaagarwal@pkfuae.com

Disclaimer:

Thisdocumenthasbeenpreparedasageneralguide.Itisnotsubstituteforprofessionaladvice.NeitherPKFUAEnoritspartners or employees accept any responsibility for loss or damage incurred as a result of acting or refraining from acting upon anything contained in or omitted from this document. If you wish to be included on the regular mailing list for this newsletter, forward your request and a mailing address to Ms. Greeta Creado, P O Box 13094, Dubai, UAE. Email:gcreado@pkfuae.com

PKF United Arab Emirates (PKF UAE) is a member of PKF Global, the network of member firms of PKF International Limited, each of which is a separate and independent legal entity and does not accept any responsibility or liability for the actions or inactions of any individual member or correspondent firm(s).