CEO of Fortius Consulting Offers Insights About UAE’s Evolving Corporate Tax Landscape
Dubai, United Arab Emirates
In a groundbreaking move, the United Arab Emirates witnessed a pivotal shift in its taxation landscape on January 31, 2022. The Ministry of Finance (MoF) announced the introduction of an taxpayer friendly federal corporate tax (CT) system, slated to take effect for financial years starting on or after June 1, 2023. This transformative decision signifies a major milestone, positioning the UAE at the forefront of the region’s economic status.
The newly introduced legislation mandates a 9% corporate tax rate for businesses with taxable profits (net) exceeding 375,000 Dhs from their inaugural financial year. A significant provision has been made to support small businesses, exempting profits up to Dhs 375,000 from taxation. This move has garnered widespread attention and conversations within the business and tax professional communities. The necessity of relying on dependable proper accounting, tax planning and advisory services becomes imperative in this context. In the context of Small and Medium Enterprises (SMEs), taxable obligations apply when the profits surpasses the threshold of 375,000 Dhs.
However, enterprises generating revenue below 3 million Dhs must adhere to the Small Business Relief (SBR) conditions to maintain tax exemption until December 31, 2026. For individuals, no tax liability or tax registration is mandatory if their revenue remains below the 1 million Dhs. A branch of a foreign company would be treated a Permanent Establishment and liable to UAE Corporate Tax @ 9%. Similarly, income earned by UAE taxpayer outside UAE, would be liable to UAE CT @ 9% or exempt, subject to the tax credit for overseas tax paid on such income .
“The UAE is actively pursuing an organised and regulated approach to conducting business, aiming to establish a robust tax system. The introduction of recent regulations is part of the country’s effort to align itself with other developed nations. VAT was implemented in the UAE a few years ago, with a standard rate of 5% for most goods and services. This rate is relatively low compared to other countries, and importantly, it has a minimal direct impact on businesses as the cost burden is transferred to the end user. However, the introduction of new corporate tax regulations means that companies will now contribute a small portion of their business profits to the government in the form of Corporate tax. Consequently, net profits will see a slight reduction, affecting business owners,” stated Mr. Ramasamy Chockalingam, a UK-qualified professional and the Chairman of Fortius Consulting, the leading business and tax advisory services provider in UAE. He is also a Practising Member of the Institute of Chartered Accountants in England and Wales.
Mr. Chockalingam, an expert in CFO services and tax planning, Corporate business advisory services, and business formation in the UAE, emphasised, “In the initial years, managing the transition will pose challenges. Businesses will be required to maintain accounts for a minimum of 5 years, either manually or electronically. Mandatory audits will be introduced for certain categories of taxpayers, necessitating businesses to become more organised in bookkeeping, accounting, and regular tax compliance activities. Non-compliance and inadequate document maintenance may prompt tax audits by the FTA (Federal Tax Authority). Potential penalties enforced during these audits could significantly impact businesses.”
Mr. Chockalingam added, “Fortius Consulting assists clients in tackling contemporary business complexities with a comprehensive range of professional services. Our expertise aids clients in understanding the importance of proper record-keeping, accounting, compliance, and strategy for tax planning. We guide our customers through the process of corporate tax registration, VAT filing, and compliance, corporate tax impact assessment and establishing a foundation of trust and partnership tailored to their specific needs.”
ArinJay Kumar Jain, Head of Tax in Fortius, also added that Multiple conferences are also being held all over the UAE to discuss about the recent advancements in corporate taxation. ArinJay is an experienced Chartered Accountant from India, a tax expert in UAE Tax and International Tax advising clients and conducting UAE tax courses.
About Fortius Consulting
Founded by Mr. Ramasamy Chockalingam, Fortius embodies a visionary approach in its inception. Boasting two decades of profound financial acumen, Fortius empowers clients to navigate intricate business landscapes with a comprehensive suite of CFO services. From Bookkeeping and Accounting Management to Banking Support, Feasibility Study, Business Incorporation, M&A Support, Due Diligence, Crisis & Risk Management, Audit Services, ESR assessment/reporting, and Tax Advisory and Planning services, Fortius caters to diverse needs across the business lifecycle.
As a registered management consultancy firm in the UAE, Singapore and India, Fortius is steered by highly skilled chartered accountants with extensive regional expertise to support clients from various countries. The firm provides cost-effective, value-added business solutions. Collaborating with Fortius opens doors to exceptional business prospects, enabling transformative growth and a broader global business presence.
