Corporate Tax Pre-Assessment

Corporate Tax Assessment in UAE

 

Corporate Tax Assessment helps businesses understand the implication of the new Corporate Tax. It is a structured analysis of the impact of Corporate Tax on the operations, business strategy and financial position of the Businesses. This is necessary for businesses to prepare for tax planning, business restructuring and ensure tax compliance. Corporate Tax Assessment also enables businesses to adapt to the new Corporate Tax regime.

Different processes of Corporate Tax Pre-Assessment

Impact Assessment

Document Assessment

Compliance Assessment

Impact Assessment

Corporate Tax Impact Assessment

Corporate Tax Impact Assessment in UAE is the process of evaluating and analyzing the potential impact of tax laws, regulations, and policies on a company’s financial performance. This involves identifying tax risks and opportunities, analyzing company’s current tax position, and recommending strategies to maximize tax efficiency.

The goal of Corporate Tax Impact Assessment in the UAE is to help companies make sound decisions on tax planning and ensure compliance with Corporate Tax laws. Understanding the actual impact of Corporate Tax on businesses is crucial before implementing it. This helps to minimize tax liabilities, enhance tax savings, and accomplish long-term business success.

Aspects of Corporate Tax Impact Assessment

Tax compliance: Assessing the company’s compliance with the tax laws and regulations in the UAE.

Tax planning: Identifying opportunities to minimize tax liabilities and maximize tax benefits, like claiming tax credits and deductions.

Transfer pricing: Examining the transfer pricing policies of the company to ensure compliance with tax laws and regulations in UAE, including the transfer of goods, services, and intellectual property agreements between related entities.

Tax incentives and exemptions: Checking the company’s eligibility for any tax incentives or exemptions offered by the UAE government, such as free zone status.

Business structures: Evaluating the current business structure of the company and considering necessary changes that may be required to minimize tax liabilities and maximize tax benefits.

International tax considerations: Assessing the effect of cross-border transactions on the company’s tax position and establish compliance with international tax laws and regulations.

Document Assessment

Businesses in UAE will be required to keep financial and other records in place to comply with Corporate Tax document requirements. Failure to meet these requirements may result in significant Corporate Tax penalties imposed by the authority. Companies must secure the files and records that explain the information on the UAE Corporate Tax return and other documents filed to the FTA.

Compliance Assessment

The Corporate Tax regime will be based on the concept of self-assessment. It implies that firms must ensure that their tax returns and accompanying schedules are correct, accurate, and in accordance with UAE Corporate Tax Law. Companies should be aware that the FTA may conduct a review of the filed Corporate Tax returns and provide an assessment within the period.

 

Taxpayers may, however, appeal an amended business tax assessment given by the Authority. As a result, Businesses may be able to appeal and revise the adjustments to comply with the Corporate Tax laws.

Frequently Asked Questions

The main reason for introducing the corporate tax rate in UAE is the OECD’s Action 1 Pillar 2. According to Pillar 2, a global minimum tax regime must exist to reduce incentives for entities to establish their operations in tax-free or less-taxed jurisdictions. Thus, the new corporate taxation has impactful consequences for MNCs operating in the country.

Yes. Transfer pricing rules will apply to all transactions with Related Parties and Connected Persons. Therefore, any loan obtained from (or granted to) a Related Party or Connected Person needs to be at arm’s length (e.g. interest rate, duration, etc.).

Businesses will be required to maintain information regarding their transactions with Related Parties and Connected Persons, and certain businesses will be required to submit this information along with their tax return. Businesses that claim small business relief will not have to comply with the transfer pricing documentation rules. Certain businesses may be requested to maintain a master file and a local file

Transactions between members of a Tax Group are eliminated in the consolidation of the Group’s financial results statements and hence do not need to comply with the transfer pricing rules, unless a member of the Tax Group needs to compute its stand-alone Taxable Income for the purposes of utilizing Tax Losses incurred before joining the Tax Group or when leaving a Tax Group.

Tax losses can be carried forward without limitation provided the same person or persons continue to own at least 50% of the entity with the losses. Where there is a greater than 50% change in ownership, tax losses may still be carried forward provided there is no major change in the nature or conduct of the entity’s business.

Companies that are part of a ‘Qualifying Group’ can transfer assets and liabilities between themselves at their net book value. This means that the transfer can be carried out tax neutrally (i.e. not give rise to a gain or loss for CT purposes).

No, unless the foreign entity is managed and controlled in the UAE and considered a UAE resident entity for UAE CT purposes. This is because only UAE resident juridical persons can form or be part of a Tax Group.

Relevant Blogs

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Thu 15 Feb 2024

Applicability of Transfer Pricing under the UAE Corporate Tax Law

Transfer pricing refers to determining the value of goods and services exchanged between related parties...

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Thu 15 Feb 2024

Requirements For Maintaining Transfer Pricing Documentation

As per the Ministerial Decision No.97 of 2023 for the purpose of Federal Decree-Law No.47...

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Tue 19 Dec 2023

Corporate Tax Currency Conversion Rules

Corporate Tax Currency Conversion Rules In the continuous development of an organization in the United...

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