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During the time of rapid and unprecedented changes over the past few years, the United Arab Emirates (UAE) has been through a series of tax reforms. There has been a rapid pace of legislative and regulatory changes which were aimed to streamline the country's tax system, bring it in line with best global practices and incorporate international standards of tax transparency to avoid harmful tax practices.
Get Free ConsultationBelow is a list of significant tax reforms in the UAE:
| Tax Legislations | Date |
|---|---|
| Value Added Tax (VAT) | 01 January 2018 |
| Economic Substance Regulations (ESR) | 01 January 2019 |
| Country-by-Country Reporting (CbCR) regulations | 01 January 2019 |
| Federal Corporate Tax (CT) | 01 June 2023 |
Value Added Tax
Indirect tax forms a part of everyday life in most countries. Following the framework agreement which sets out the underlying principles of VAT between Gulf Cooperation Council (GCC) member countries, VAT was implemented by UAE on 1 January 2018.
VAT is a general consumption tax which is levied on the majority of transactions of goods and services unless specifically exempted by the law. VAT is charged at every stage of 'Value Addition' in the supply chain and the mechanism of input tax credit (ITC) ensures that the businesses, on behalf of the government collect the tax from the end consumers, account and pay the tax.
Businesses are increasingly being challenged to meet their multiple VAT obligations. Watchful planning is required for implementation of VAT as revenue authorities are being digitalized and there is a demand for more transparency and financial information.
Corporate Tax
On 9 December 2022, the UAE Ministry of Finance (MoF) released the Corporate Tax Law (the Law) which provides the legislative basis for introduction and implementation of CT regime in the country which will become effective for financial years beginning on or after 1 June 2023. The certainty of CT regime will further strengthen the UAE's position as a leading hub for international businesses and investment thereby accelerating the country's strategic objective towards development and transformation.
CT, also known as "Corporate Income Tax" or "Business Profits Tax" is a form of direct tax levied on the net taxable profits of corporations and other businesses operating within the seven Emirates (barring certain exceptions as per the law). Given that the concept of CT is new, it is essential for businesses to understand the paradigm shift happening in the tax landscape and its potential impact on their operations in order to be compliant with the law.
Our Approach to Tax Services
At BOT Advisory, our team of dedicated and experienced tax professionals stay up-to-date on tax developments at the local and national level and are well-equipped to give the perspective and support to handle requirements of organizations to align their businesses operations with the changing regulatory environment. We aim to provide our clients efficient and high-quality service tailored to specific needs throughout the entire tax life cycle - planning, provision, compliance and working with tax authorities.