[Opinion] Impact of Recent Government Decisions on the UAE Corporate Tax Law

CA Rishabh Agarwal – [2023] 150 taxmann.com 28 (Article)

1. Introduction

The United Arab Emirates (UAE) is a leading business hub and a global financial centre, offering various incentives and benefits to attract foreign investment. In December 2022, the UAE government introduced the Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses, also known as the “Corporate Tax Law,” as a legislative basis for the implementation of the Federal Corporate Tax. The Corporate Tax Law is effective from 1 June 2023, and its implementation is expected to support the UAE’s strategic objectives, accelerate its development and transformation, and enhance its competitive position as a business destination.

This paper examines the implementation of the Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses, also known as the “Corporate Tax Law,” in the United Arab Emirates (UAE) along with the recent Cabinet Decisions, Ministerial Decisions and FTA Decisions issues. The paper explains the overview of the UAE CT and also the impact of the various decisions issued in this regard. Additionally, the paper describes Corporate Tax, the types of taxable persons subject to it, and the scope of the law.

The introduction of Corporate Tax in the UAE is primarily aimed at diversifying the country’s revenue streams, reducing its reliance on oil revenues, and supporting its economic growth and development. The Corporate Tax Law also aims to ensure a competitive Corporate Tax regime that adheres to international standards and promotes transparency and compliance. The law incorporates principles that are widely accepted and understood globally, making it clear and predictable for taxpayers. Further, the UAE seeks to align itself with new international standards, particularly the move toward a global minimum tax on multinational corporations endorsed by the G20.

2. Scope of the Law

The Corporate Tax Law applies to taxable persons, including those established in a UAE Free Zone, subject to certain conditions. A Taxable Person as defined in the CT Law, is an individual and/or entity that is subject to UAE CT. For the purposes of the CT Law, a distinction is made between a Resident Person and a Non-Resident Person, and the applicable Tax base will depend on the nature of the Taxable Person.

A Resident Person is any of the following Persons:

• A juridical person that is incorporated or otherwise established or recognised under the applicable legislation of the State, including a Free Zone Person.
• A juridical person that is incorporated or otherwise established or recognised under the applicable legislation of a foreign jurisdiction that is effectively managed and controlled in the State.
• A natural person who conducts a Business or Business Activity in the State.
• Any other Person as may be determined in a decision issued by the Cabinet at the suggestion of the Minister.

A Non-Resident Person is a Person who is not considered a Resident Person under Clause 3 of this Article and that either:

• Has a Permanent Establishment in the State as under Article 14 of this Decree-Law.
• Derives State Sourced Income as under Article 13 of this Decree-Law.
• Has a nexus in the State as specified in a decision issued by the Cabinet at the suggestion of the Minister.

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