Corporate Tax Update in the UAE: Staying Informed with the Latest Changes

As of 23 May 2023 by AccountAbility Team

What are the latest updates?

The UAE Ministry of Finance has recently introduced new ministerial decisions about Corporate Tax, just ahead of the anticipated launch on June 1, 2023. These decisions, outlined in Ministerial Decisions No. 114, 115, and 116 of 2023, aim to enhance the flexibility of the UAE’s Corporate Tax framework and establish a conducive business environment across sectors.

Ministerial Decision No. 114 focuses on Accounting Standards and Methods, designating International Financial Reporting Standards (IFRS) as the applicable standard. This decision simplifies accounting processes for small and medium-sized enterprises (SMEs) and aims to reduce the compliance burden for businesses subject to corporate tax. Larger businesses with revenues exceeding AED 50 million are required to adhere to IFRS, while SMEs with revenues not exceeding AED 50 million have the option to apply for IFRS. Additionally, businesses with less than AED 3 million in revenue can utilize the cash basis accounting method.

Ministerial Decision No. 115 addresses Pensions and Social Security Funds, establishing conditions for privately regulated pension funds and social security funds to be exempt from Corporate Tax. The decision ensures alignment with international tax practices, enabling recognition of UAE private pension or social security funds’ exempt status when investing internationally and facilitating access to double tax treaty benefits. The decision also sets out maximum contributions per beneficiary and mandates an annual confirmation of compliance by a statutory auditor to maintain the exemption’s integrity.

Lastly, Ministerial Decision No. 116 introduces the Participation Exemption as part of the UAE’s corporate tax framework. The Participation Exemption aims to prevent double corporate taxation on the profits of a single entity and eliminate international double taxation. This means that qualifying entities are granted relief from paying corporate tax on income derived from their investments in other entities.

By implementing the Participation Exemption, the UAE aligns itself with international tax practices and mitigates the potential adverse impact of double taxation on businesses operating within its jurisdiction. This mechanism helps to eliminate barriers to cross-border investment and facilitates international trade by streamlining the process and fostering an environment that promotes economic efficiency.

In light of these updates, AccountAbility provides valuable assistance to businesses with the corporate tax registration process. Our team’s expertise can guide businesses in adhering to the specified accounting standards, ensuring accurate financial statements that serve as the basis for calculating taxable income.

Furthermore, we can offer support and guidance in understanding the compliance requirements, ensuring that businesses fully benefit from Corporate Tax. By partnering with us, businesses can navigate the intricacies of the corporate tax regime, optimize tax planning strategies, minimize tax liabilities, mitigate challenges, and achieve greater certainty in local and cross-border operations.

How we can help you?

At Accountability, we understand the importance of maintaining a strong relationship with our clients and supporting them throughout their corporate tax journey. We go beyond assisting with initial corporate tax registration by providing ongoing support to keep our clients up to date with the latest changes in corporate tax regulations.

Our dedicated team stays informed about any amendments, ensuring that our clients remain compliant with the evolving tax laws. We proactively communicate with our clients, offering personalized guidance and tailored solutions to meet their specific needs.

By prioritizing client satisfaction and staying ahead of corporate tax changes, we strive to build long-term partnerships based on trust, reliability, and a shared commitment to financial compliance. Call 0502798784 or email us at info@accountability for more information. Our comprehensive approach includes regular consultations, timely reminders for tax filings, and proactive monitoring of compliance requirements.