[World Tax News] UAE Federal Tax Authority Releases Guide on Taxation of Foreign Source Income and More

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  • Last Updated on 2 December, 2023

UAE's Guide on Taxation of Foreign Source Income

Editorial Team – [2023] 157 taxmann.com 24 (Article)

World Tax News provides a weekly snippet of tax news from around the globe. Here is a glimpse of the tax happening in the world this week.

1. UAE federal tax authority releases guide on taxation of foreign source income

The Federal Tax Authority of the United Arab Emirates released the Corporate Tax Guide for Taxation of Foreign Source Income. The guide delineates its objectives and specifies the target audience as follows:

(a) Purpose of this guide:

This guide provides general guidance to taxpayers on taxing foreign source income under the Corporate Tax Law. The guide explains the following:

i. Relevance of foreign source income under the Corporate Tax Law;

ii. What is considered foreign source income for Taxable Persons under the Corporate Tax Law?

iii. Which Taxable Persons are subject to tax on foreign source income?

iv. When is foreign source income taxable?

v. Determining Taxable Income and Exempt Income in respect of foreign source income; and

vi. What is a Foreign Tax Credit, and how is it computed?

(b) Who should read this guide?

A Taxable Person who receives or derives income from sources outside the UAE, including a Qualifying Free Zone Person, should read the guide. It is intended to be read in conjunction with the Corporate Tax Law, the implementing decisions and other relevant guidance published by the FTA.

Source: Corporate Tax Guide on Taxation of foreign source income

2. Norway is set to introduce global minimum tax for large multinational enterprises

On November 24, 2023, the Norwegian Government put forward a Bill to the Parliament to implement internationally agreed rules on global minimum tax. The proposal results from long-term international collaboration to change the framework for taxing large, multinational enterprises. The collaboration occurs in the OECD Inclusive Framework, an international cooperative body with over 140 member countries and jurisdictions. The Inclusive Framework has collaborated to reach a consensus on reforming international tax rules, intending to find effective methods to tackle the challenges arising from the digitalisation of the economy.

In 2021, political agreement was reached on a solution consisting of two parts, referred to as pillars. It is pillar 2 of this two-pillar solution, which the Government now proposes to implement into Norwegian domestic law to enable the global minimum tax level. The Bill is based on model rules drawn up by the Inclusive Framework.

This will deter profit shifting and ensure large business groups pay at least 15 per cent tax on their profits. The rules have been developed in an extended OECD collaboration with over 140 jurisdictions and will apply in Norway starting January 1, 2024.

The rules will apply to international companies with consolidated group revenues exceeding EUR 750 million. The ruleset ensures these groups pay a minimum effective tax rate of 15 per cent on their profits in all countries. The purpose is to protect the tax base from profit shifting and to counteract harmful international tax competition.

Source: Press Release dated 24-11-2023

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